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Your retirement benefit is subject to federal income tax (except for previously taxed contributions) but is exempt from New York State income tax.
After you enter your 1099-R form TurboTax will ask you to Select the state and where is this contribution from. Select NY state and City Education.
Your New York State Teachers' Retirement System pension will be a subtraction on your New York State return (IT-201) on line 26.
So this is the screen I see. When I choose the first bullet, which i presume represents "New York State and City Education", Turbotax does not properly treat this as tax exempt for New York. It is treated as taxable. Based on the screen, it is hard to tell which option to choose for "NY State and city education", but i can validate that none of the choices results in the income being treated as tax exempt. (A couple of the choices results in 20k of income being tax exempt, but not the full amount).
What should I do?
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