In filing my taxes this year I was trying to determine the 401k CARES withdrawals and how it relates to New Jersey. A prior post led me to the 'general rule' section and it seems like that worked. However, I am struggling to understand how New Jersey isn't taxing twice for 401k withdrawals.
In 2018 I took a withdrawal to help with a home purchase, so there were no COVID-related exceptions. But NJ is adding the contributions to my income already (hence the higher state income on the W2) and then taxing the withdrawal as that was added to my income in 2018. So aren't I being taxed twice? I followed TurboTax in 2019 when filing and it wasn't clear that I should be doing something else, ultimately that's on me. But it certainly seems like I paid tax twice on that amount for the state.
