Updated October 16, 2026. Quick answer: New Jersey taxes pension and annuity income. A pension exclusion is available to people 62 or older, or blind or disabled, when line 27 income is $150,000 or less: the maximum is $100,000 joint or $75,000 single at $100,000 of income or less, and above that it falls to a percentage of pension income (50% then 25% joint, 37.5% then 18.75% single). The instructions mention 403(b) and 457 only for contributions.
State retirement-income forms, line by line: NJ-1040 pension exclusion.
New Jersey at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | Taxable, with the exclusion for those 62 or older under the income limit |
| Do the state’s documents name these plans? | The documents read name 403(b) plans but not 457(b) plans |
| Retirement exclusion or credit | Pension exclusion maximum of $100,000 (joint), $75,000 (single) or $50,000 (separate) at line 27 income of $100,000 or less, then a percentage of pension income at $100,001 to $125,000 (50% joint, 37.5% single, 25% separate) and $125,001 to $150,000 (25%, 18.75%, 12.5%); none above $150,000; age 62 or older or blind or disabled |
| Public-employee pension rule | No separate public-employee exclusion described |
| Rate in the documents read | Progressive; schedules in the 2025 NJ-1040 instructions |
| Changed for 2026? | The 2025 instructions read describe no 2026 change |
What the New Jersey documents say
The 2025 NJ-1040 instructions say “Retirement income such as pensions, annuities, and certain IRA withdrawals is taxable” in New Jersey, and the exclusion applies only if the taxpayer was 62 or older or blind or disabled and the line 27 income is $150,000 or less.
The instructions list 403(b) and 457 plans in a different place: employee contributions to them are included in New Jersey income when made. Separately, the instructions explain how the taxable part of a contributory plan distribution is worked out, by the Three-Year Rule or the General Rule method.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says pension and annuity payments from a qualified employer plan have “all or some portion of the amounts you receive may be taxable”.
What the documents do not say
- The instructions do not say in so many words that a 403(b) or 457(b) distribution qualifies for the pension exclusion.
- This page does not apply the Three-Year Rule or General Rule methods to a particular withdrawal.
Common mistakes
- Assuming New Jersey’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether New Jersey taxes 401(k) and IRA withdrawals, New Jersey retirement taxes, whether New Jersey taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
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Answer againSources
- 2025 NJ-1040 Instructions: https://www.nj.gov/treasury/taxation/pdf/current/1040i.pdf
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.