I contribute to my 401k before taxes. Does nj state see that as income still?

[fanfare]

Look at the instructions for NJ-1040

you will prorate your NJ basis in your Traditional IRA ( which requires you have the detailed records of all IRA contributions while a NJ resident).

There is nothing equivalent to prorate or otherwise account for a basis in a 401k distribution.

That's why TurboTax doesn't do it.

If NJ does deduct the 401k contribution from wages (which I conceded above), there is no issue with 401k distributions.

[Chris-Mc]

I do have a situation in 1983 for 3 months where NJ taxed my contribution to my 401K plan and the feds did not.  The 401K statement only accounts for the Federal tax paid contribution and not the NJ tax paid contribution.  So, how do I have turbo tax account for the $1,400 that NJ already taxed me on back in 1983 just before they started using the federal pretax rules in 1984?  Otherwise I will be double taxed in NJ on $1,400.

[DianeW777]

You are correct in regards to New Jersey (NJ) allowing a reduction for retirement that was already taxed through payroll deduction.  Check your 1099R and enter a lower amount for the state distribution.  The worksheet in the link below will help you figure out your tax free amount for NJ for 2022.

• NJ Bulletin Pensions and Annuities (start on page 8 for 401(k) information)

@Chris-Mc 

[Chris-Mc]

Thank you for this information.  I thought I would post the following in an effort to also help others asking about the same topic.

So, I went back to my NJ return and tried to enter the amount already taxed on my 401K figuring I would get the a similar screen like I get for my IRA accounts.  But like a previous poster, I could find no such option.  But there was a comment stating that exclusions were handled on the federal return.  I thought this was a bit odd because the excluded amount only applied for my NJ state return and not my Federal return.

So, I revisited the 1099R form on the federal return and this time I carefully paid attention to all the pop up screens.  There was one that asked to enter the taxable portion for NJ.  It already populated that field with what was on the 1099R form.  I then changed that number to the lower number by subtracting the amount I already was taxed by NJ in 1983.  I then selected the 3 year rule because all of this excluded amount would be withdrawn in 3 years.

When I did this the NJ tax/refund number on the top of the screen went from showing a large number for taxes owed to a large refund.  Well, I knew that wasn't right and I thought information must be missing since TurboTax never asked me to enter baseline information on the NJ 3 year rule I selected.  I still continued and when I got to the Review section, sure enough, there were a few screens that came up asking me to enter the baseline information for the NJ 3 year rule.  Once I did that, the correct tax calculation appeared on the NJ return with the amount already taxed excluded.

Hopefully this description will help others in NJ that had a 401K distribution with money in the account that was already taxed by NJ prior to 1984.