It depends on the distribution. Let's look at NJ IRA distributions:
NJ says a qualified distribution has been in your ROTH account for at least 5 years and meets these qualifications.
• On or after the date the individual reaches age 59½; or IRA Withdrawals Rev. 12/18 3
• To a beneficiary (or the individual’s estate) after the individual’s death; or
• Because the individual became disabled; or
• As a qualified first-time home buyer distribution as defined by the Internal Revenue Code.
The question becomes, is your distribution qualified or not.
Yes, qualified and not taxable.
NJ IRA distributions: Roth IRAs.
If you receive a qualified distribution from a Roth IRA, do not report any portion of the distribution on your return. Do not report the amount that represents your previously taxed contributions or the amount that represents earnings and amounts rolled over that were not previously taxed.
No, not qualified.
NJ IRA distributions: If you receive a nonqualified distribution from a Roth IRA, part of the withdrawal is taxable, and part is excludable. You must report the taxable portion of the withdrawal on Line 20a, Form NJ-1040 or Line 22, Column A, Form NJ-1040NR. Residents must also report the excludable portion on Line 20b, Form NJ-1040
NJ basically taxes all contributions to retirement accounts so they are not taxed when withdrawn. The federal allows people to set aside 401k, traditional IRAs, etc with reduced income and then taxes at withdrawal.
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