So both wages and distributions from a 401(k), assuming it is a pre-tax account, are both income for federal tax purposes. They both along with many other income items are added or subtracted to get to adjusted gross income.
For state tax purposes along with the states that do not tax income from work (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming), Illinois, Iowa, Mississippi and Pennsylvania do not tax 401(k) distributions. Beginning in 2026, Michigan will not tax them either.
Thank you for the question @Fernando10
All the best,
Marc T.
TurboTax Live Tax Expert
27 Years of Experience Helping Clients
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