Your cost basis is how much you paid in. Take a look at this information. You can see What is the cost recovery method referred to in PA instructions states:
What is the cost recovery method referred to in the personal income tax instructions?
The cost recovery method is a way to determine how much of a distribution from a retirement plan or annuity is taxable. Under the cost recovery method, an individual "recovers" all of his or her contributions to a retirement plan, before reporting any PA taxable income.
For example, if you contributed $200 a month for 80 months to a qualifying pension plan, you contributed $16,000 to the plan. If you took a lump sum distribution of $20,000 before you were qualified to retire, only $4,000 would be taxable. Based on the cost recovery method, the first $16,000 of the distribution was your own money, leaving only $4,000 as taxable.
If you recover all your contributions, and still have not reached the age of 59½, then any subsequent withdrawals are taxable until you reach the age of 59 1/2.
Gross Compensation - PA Department of Revenue shows taxable, non-taxable and the iffy income.
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