Are 401k contributions earned in New York State taxable in pa? I live in pa ...work in nys.

[morris5365]

Live in pa but work only in nys.  W 2 has d code with an amt contributed to 401 k plan at nys employer.  No pa withholdings...only nys.   Do I have to add this 401 k amt to  wages on pa return

[AnthonyC · Accepted solution]

Yes, you will need to add back in the amounts that were deferred on your W2 - PA does not allow these contributions to be pre-tax.  

Here is how you can add back these amounts:

• Proceed through your PA resident return
• When you get to the Compensation Summary screen, select Edit next to your NY W2
• The next screen will ask you to Verify this Income** - select the box next to "I need to make an adjustment to the taxable amount of this income" (Note:  if you get a different screen here with only one option to make the entire amount taxable - you will need to first make the entire amount taxable and then loop back through this screen and you will get the option to adjust)
• On the next screen, you will need to include the entire PA taxable amount - this will include your reported federal wages plus any amounts deferred with code D in box 12.

**If you click the More Info tab on this screen, you will get the following information:  "Some out of state employers don't always know the taxation rules for PA. You should review these W-2s and include as taxable any deferred compensation, such as contributions to a 401(k) or 403(b) plans which are not deductible in PA"