topic State Tax 401k in State tax filing

State Tax 401k

xblueskies — Fri, 20 Mar 2020 02:35:58 GMT

Does NC calculate state tax based on full amount without retirement deductions? There is no place on form it-201 or it-203 to put your deductions.

Re: State Tax 401k

BillM223 — Fri, 20 Mar 2020 14:11:02 GMT

Whether the retirement deductions on the federal return are contributions to a 401(k) plan or a traditional IRA, both of the amounts are reflected in the federal Adjusted Gross Income (AGI) - line 8b of form 1040. By "reflected" I mean that these deductions have already been removed from your federal AGI.

Since the North Carolina return starts with the federal AGI (see line 6 on the D-400), there is no need for an additional deduction on the North Carolina return for these retirement deductions, because they are already in the state income calculation.

Re: State Tax 401k

xblueskies — Sun, 22 Mar 2020 20:15:43 GMT

Thanks for the response... However, I feel like I am still lost.

I am doing a part-year resident NC state tax return. When calculating the proportion of my NC source income, I don't see a space to put in K-1 retirement deductions. The Turbotax software transfers the K-1 earnings to the NC state forms, but does not subtract deductions for 401k, 401k match, and profit sharing. Thus, the proportion of my NC state source income is calculated with the K-1 deductions still added in both the numerator and denominator, which affects the percentage by about 7%.

Re: State Tax 401k

KrisD15 — Sun, 22 Mar 2020 20:26:04 GMT

Enter the allocated amount with the adjustment already made.

From your question, that would mean allocating an amount reduced my 7%.