Maine Pension Income Deduction and Roth Conversions

[Smithy4]

61-year-old Maine resident, taking 30K withdrawal from IRA and putting it into Roth account (Roth Conversion).  1099 form has Box 7 coded as Normal distribution.  Not taking Social Security.  TurboTax software allows the Roth Conversion, full 30K as Maine Pension Income Deduction (shows up on Maine Schedule 1S worksheet.  However, note on Maine Schedule 1S worksheet states Roth Conversions are not allowed.  Title 36 Maine Tax Code makes no mention that Roth Conversions need to be excluded from Maine Pension Income Deduction.  My question is, do Roth conversions need to be excluded from Maine Pension Income Deduction?  If so, TurboTax software will need to exclude Roth Conversions in present calculations.

[HollyP]

No, the deduction may not be taken when a taxpayer converts a traditional IRA to a Roth IRA. Review your state interview entries in TurboTax, and look for the page titled Pension Income Deduction. Here you are instructed to enter any portion of the amount from your federal return that is eligible for the deduction. You should not include the $30,000 from the conversion here. Enter 0 if none of your pension or IRA income is eligible. 

[Smithy4]

Thanks for the reply.  My question is still not answered. Where is your source document that says IRA distribution to Roth account (Roth Conversion) is excluded from pension income deduction?  Where in Maine Title 36 tax code does it state this?

[PaulaM]

The Maine Schedule 1S worksheet instructions specifically notes that Roth conversions are not allowed. See instructions here. 

[Smithy4]

Thanks for your reply and takin time to provide a response to my question.

I agree, there is a note on Maine Schedule 1S worksheet stating the following:

Note that a conversion of benefits from one account to another does
not qualify for the pension income deduction. For example, a deduction
may not be taken when a taxpayer converts a traditional IRA to a Roth
IRA. The taxpayer, in this case, does not receive a retirement or IRA
benefit at the time of conversion.

However, this note does not appear to be substantiated in Title 36 of the Maine tax code.  All the other pension deduction exclusions appear in Title 36 of the Maine tax code.  Can anyone show me where in Title 36 of the Maine tax code that states Roth Conversions need to be excluded from Maine pension income deduction?  

Also, can anyone explain the last part of the note on Maine Schedule 1S worksheet stating "when a taxpayer converts a traditional IRA to a Roth IRA. The taxpayer, in this case, does not receive a retirement or IRA benefit at the time of conversion"?   

Thanks

[PaulaM · Accepted solution]

There is no section in Maine Title 36 tax code that explicitly states Roth conversions are prohibited from the pension income deduction.
 

However, administrative rule (or interpretation) is reflected in the tax preparation instructions. These rules are granted the authority to fill in the details or speak to situations not specifically covered by statutory laws via the tax preparation instructions. The administrative rules are there to implement, clarify and enforce statutory laws.

For more clarity regarding the Maine Title 36 tax code and the prohibition of Roth conversions from the pension income deduction, you should contact Maine Department of Revenue directly.