As people approach retirement, they may look forward to travel, to volunteering, perhaps to a second home.  Most are not focused on keeping taxable income within one set of parameters, modified adjusted gross income within another, and state income within a third.  Perhaps they should be. A little thought before age 65 as to how you structure your income can save you considerably down the road. Here, we’ll look at three income levels which, if you can plan your way into, are worth the effort.

Zero Capital Gains Tax.  If you can keep your taxable income within the twelve percent bracket for federal taxes, your federal long term capital gains tax rate is zero.  People can find themselves here if they retire before taking Social Security, pensions, and mandatory IRA withdrawals. In those years, they often live off taxable investments--largely untaxed return of principal.  If you can work yourself into this situation, it’s a great time to chip off part of a concentrated stock position. Alternatively, you can begin converting pieces of your traditional IRA to a Roth, holding down the size of future RMDs and saving future tax dollars.

Taxable income is after all deductions.  The chart below shows how to reverse engineer into that, assuming the standard deduction.  Income levels differ between Married Filing Jointly and Single; those age 65 or older receive an enhanced standard deduction.  Note the key number is adjusted gross income (AGI). That number appears on line seven of your tax return. For most people, it’s the same number as gross income; if you are self-employed, pay deductible alimony, or fall into a few other specific categories, it may be different.

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Taxable Income Amount



Standard Deduction/Senior Boost (age 65)



AGI for Zero Capital Gains



Lower Medicare Premiums.  Medicare premiums are based on income from two years earlier (the most recent numbers available to Social Security).  This means your first year Medicare premiums are based on your earnings at age 63. That can be very expensive for high earners.  Here, the key is your Modified Adjusted Gross Income (MAGI)—a number appearing nowhere on your tax return. To arrive at MAGI, begin with AGI.  To that, add back (a) any untaxed bond income, (b) the untaxed portion of Social Security payments, and (c) any untaxed overseas earned income (this one is uncommon).  Here is the current rate chart; the numbers are effective for 2019, after which they are to be inflation adjusted. Also note that these premiums can apply to Medicare Advantage plans as well, depending on their coverage.

2019 Monthly Premium Part B (medical visits)

2019 Monthly Premium Part D (prescriptions)


Single 2019 MAGI



Up to $170,000

Up to $85,000



















  • $750,000

  • $500,000

Zero New Jersey Tax on Retirement Income.  New Jersey has been trying to make itself more affordable in retirement.  The state has never taxed Social Security benefits. Further, it does not tax either New Jersey municipal or federal government bond interest.  Ignoring those categories of income, if your New Jersey gross income (line 26 on the New Jersey tax return) is at or below a certain level, none of your retirement income is taxed.  This benefit is available for those age 62 and over.  

This provision allows your pensions and IRA distributions to escape New Jersey tax altogether.  Beware: the New Jersey exclusion is an absolute cliff, not a phase in. If you have one dollar of income over the exclusion amount, all retirement income is taxed.  Naturally, the definition of New Jersey gross income does not line up with any definition of income for federal purposes.


MFJ Gross Income

Single Gross Income







As these charts show, there are many moving pieces.  Luckily, each of these tax situations is determined annually—even if you can’t shoehorn your way into one this year, you may be able to do so next year. 

Note: Claire E. Toth, JD, MLT, CFP™, is Vice President at Point View Wealth Management, Inc., a registered investment advisor at 382 Springfield Ave., Summit. Visit us at

For over 25 years, Point View Wealth Management, Inc. has been working with families in Summit and beyond, providing customized portfolio management services and comprehensive financial planning, to develop and achieve their financial goals.  Click here to contact David DietzeClaire TothDonna St.Amant, and Elaine Phipps, or call 908-598-1717 to learn more about Point View Wealth Management, Inc. and how we can help you and your family meet your financial objectives. To sign up for our complementary commentaries and newsletters, e-mail us at

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