Whether you have to pay New Jersey income tax on disability pensions and benefits depends on the type of benefit. For example, if you receive a disability pension from a New Jersey public retirement system (such as PERS, TPAF, or PFRS) due to a total and permanent disability, it is generally not taxable in New Jersey.
Other disability benefits:
Social Security Disability Benefits (SSDI and SSI) – These benefits are not taxable in New Jersey.
Private Disability Insurance Benefits – If you receive benefits from a private disability insurance policy, they may be taxable depending on whether the premiums were paid with pre-tax or after-tax dollars.
Workers’ Compensation – Benefits received under workers’ compensation for job-related injuries or illnesses are not taxable in New Jersey.
Military and VA Disability Benefits – These benefits are not taxable in New Jersey.–Matthew Wolfe, Esq., Hackettstown