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Get your taxes done using TurboTax
It is only an apparent non sequitur. New Jersey says
Traditional IRA The New Jersey Gross Income Tax Act does not contain any provisions similar to the Internal Revenue Code that allow an individual to deduct contributions to an IRA. Contributions to an IRA are subject to New Jersey Income Tax in the year they are made. When you make a withdrawal from an IRA, the amount you contributed is not taxable, since the contributions were already taxed.
You see, only the earnings in that $150,000 IRA distribution is taxable, not the part of the $150,000 that you put into it. So it could happen that your earnings might be $80,000 on $70,000 of contributions (enter your own numbers here). In this example, the $80,000 would be taxable in NJ, not $150,000.
As for the IRA contributions made in Texas, NJ says that any IRA contributions made before you moved to New Jersey are treated as if you made th... i.e., as if they were already taxed on the way in, so not taxable on the way out.
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