Does NJ tax IRA to Roth IRA conversions

[jrc0109]

I state income tax due when money is transferred from a traditional IRA to a Roth IRA?

[rjs]

Withdrawals from a traditional IRA are usually not fully taxable in New Jersey. But any amount that would be taxable if you simply withdrew it from the IRA is also taxable if you convert it to a Roth IRA. For more details see the following publications from the New Jersey Division of Taxation.

Tax Topic Bulletin GIT-2, IRA Withdrawals
http://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git2.pdf

Technical Bulletin TB-44(R), Roth IRAs
http://www.state.nj.us/treasury/taxation/pdf/pubs/tb/tb44.pdf

Publication GIT-2 has not been updated for 2018. The exclusion amounts will be higher for 2018, and the line numbers on Form NJ-1040 may change, but the rules are otherwise the same.

[jrc0109]

Thank you. How does one determine for NJ the taxable portion of a 401K that was contributed to over many years, then upon retirement converted to an IRA? A portion of the IRA was then converted to a Roth IRA.

[rjs]

It depends on how many years "many years" is. The NJ treatment of 401(k) contributions changed on January 1, 1984. If all your 401(k) contributions were made after that date, the entire amount is taxable. If you rolled it over to an IRA, the entire amount rolled over to the IRA is part of the taxable portion of the IRA. If you never made any other contributions to that IRA - that is, the IRA contains only money that was rolled over from the 401(k) - then all distributions from the IRA are fully taxable. The amount you converted to a Roth IRA was taxable in the year that you converted it.

[tc333]

Thanks for the question and answer.  Should the above 401K to IRA, then, convert partially to Roth process use NJ General Rule or, IRA Withdrawal to compute the taxable portion?