Why is a withdraw of original contributions from my Roth IRA showing as not taxable at the federal level but taxable for NJ?

[DanaB27]

Please be aware that if your 1099-R has code J or T in box 7 then this distribution is taxable in NJ.

From NJ Treasury:

Nonqualified distributions are reported as pension and annuity income, the pension and/or other retirement income exclusions may apply.

A qualified distribution from a Roth IRA is excludable from income and should not be reported anywhere on the New Jersey tax return. A qualified distribution is one made after the five-year period beginning with the first tax year for which a contribution was made to the IRA, and that is:

• Made on or after the date the individual reaches age 59½; or
• Made to a beneficiary (or the individual's estate) after the individual's death; or
• Made because the individual became disabled; or
• Made as a qualified first-time homebuyer distribution as defined by the Internal Revenue Code.

A distribution will not be treated as a qualified distribution if it does not meet the Internal Revenue Service's five-year rule. 

[k44devil]

Thank you!

One follow up question that I'm still unclear on.  On the IRA information screen within my Turbotax NJ state return it asks for the total of previously taxed IRA contributions, which I provided from my Roth IRA.  But then it asks for the year-end value of ALL IRAs.  Does this mean all Roth IRAs or all IRAs including traditional?  Including my Traditional IRA seems counterintuitive.  It's also much larger and therefore greatly impacts the exclusion ratio calculation.  Lastly, it seems to contradict NJ Tax Bulletin GIT-2 which seems to specify a singular IRA on the IRA worksheet.

Appreciate the guidance.

[DaveF1006]

The reason why Turbo Tax is asking the year-end balance of all Iras (both traditional and Roth)  is to complete the IRA worksheet that is referenced in that bulletin. It is used  to calculate the taxable and excludable portions of a withdrawal from a traditional IRA or nonqualified withdrawal from a Roth IRA.

It does mention that you can combine all your IRA's into one worksheet.