Non-taxable Pension income

[djletin]

I received my 1099-R from the state of New Jersey indicating Gross and Taxable Income of $38,000.  However, I contributed $107,000 to my pension on an after-tax basis, so up to this amount should be non-taxable.  How do I enter non-taxable pension income in TurboTax?  

[VolvoGirl]

The 1099R should be prorated between taxable and non taxable.  You don't get to exclude the whole amount.  The plan should be keeping track of it.  Isn't there a different amount in box 2a?  And some in box 5?  

[djletin]

This is my second year in retirement (second year receiving pension).  The New Jersey state pension rep explained to me that the first several years are generally tax free as first the employee contributions are distributed.  For me, this is equates to about the first three years of pension.  After the employee contributions are paid out, the pension payments become fully taxable (year 4 for me).   Payments are not prorated between taxable and non-taxable. Only  boxes 1 (Gross distribution) and 2a (Taxable amount) have amounts which both have the total amounts of pension payments I received in 2023.  The "plan" does not track the amount of taxable or non taxable amount on your 1099-R.   When you retire, NJ Division of Pension and Benefits provides a printout of the total member contributions.  For my 2022 return, I was able to enter the "taxable" amount from the 1099-R but at some point was then able to exclude it from my overall income.

[djletin · Accepted solution]

Correct answer is:   for previously  taxed pension income, use the "Three Year Rule" to exclude pension contributions previously taxed. In New Jersey, this amount is approximately the first three years of receiving pension income.