The bill amends New Jersey's gross income tax law to exclude certain contributions, withdrawals, and rollovers from various retirement savings plans from a taxpayer's gross income. It removes the previous provision that included amounts distributed from employee trusts attributable to contributions excluded from gross income and introduces new language clarifying that pensions and annuities are excluded from gross income, except for specific exclusions outlined in N.J.S.54A:6-10. The bill expands the list of contributions not included in gross income to cover qualified pension plans, annuity plans, and deferred compensation plans, aligning state tax treatment with federal regulations, including amounts rolled over from traditional IRAs to Roth IRAs.

Additionally, the bill defines a "qualified withdrawal" as a withdrawal from these retirement accounts that complies with federal regulations and incurs no penalties or additional taxes for nonqualifying withdrawals. A significant change is made to the gross income threshold for taxpayers, increasing the limit for the exclusion to $150,000 for taxable years beginning on or after January 1, 2021, up from the previous limit of $100,000. This adjustment aims to enhance financial security for New Jersey taxpayers as they prepare for retirement, encouraging greater participation in retirement savings plans without the burden of additional taxation on these funds.

Statutes affected:
Introduced: 54A:6-21