topic I contribute to my 401k before taxes. Does nj state see that as income still? in Retirement tax questions

I contribute to my 401k before taxes. Does nj state see that as income still?

draghi-eric — Mon, 09 Mar 2026 06:30:19 GMT

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

Cynthiad66 — Tue, 01 Feb 2022 14:41:51 GMT

In New Jersey, contributions to a regular 401(k) plan are exempt from income in the year contributed. Therefore, you have no basis in your 401(k) plan, so withdrawals are fully taxable.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

fanfare — Tue, 01 Feb 2022 15:20:08 GMT

No deduction in NJ for your 401K contribution nor for IRA contribution.

For IRAs you need to keep good records.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

SteamTrain — Tue, 01 Feb 2022 17:35:50 GMT

@fanfare Careful... pre-tax 401k contributions are handled different from other plan types as to whether they are excluded form NJ wages :

"The wages you report for federal tax purposes may be different than the wages you report for New Jersey purposes. ... New Jersey does not allow you to exclude from wages amounts you contribute to deferred compensation and retirement plans, other than 401(k) Plans"

State of NJ - Department of the Treasury - Division of Taxation - NJ Income Tax Wages

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

fanfare — Tue, 01 Feb 2022 18:14:09 GMT

It may say that on the website, but on my brother-in-law's W-2 I don't see any reduction in state wages for 401k.

And I never saw it on my own W-2 when I was working in NJ.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

draghi-eric — Tue, 01 Feb 2022 18:23:57 GMT

From what I saw its excluded when its an employee of a company contributing to the plan not person 401k or IRA

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

SteamTrain — Tue, 01 Feb 2022 19:31:06 GMT

@fanfare

I checked my last Full year NJ W-2 from 2001, and the full amount of the 401k contribution was deducted from the NJ state wages (box 16).

It would have matched box 1 exactly...except there was ~$490 added back to NJ wages for some other Federal Cafe 125 deduction that NJ didn't allow...don't recall what that was for now 20 years later.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

fanfare — Tue, 01 Feb 2022 22:03:35 GMT

@draghi-eric

Why do you post the question?

Do you see a big difference in the taxable amounts, approximately equal to your 401k contribution, or not?

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

tcaliendo — Tue, 15 Feb 2022 19:08:03 GMT

The reply makes no sense, ARE THE CONTIBUTIONS EXCLUDABLE, no one said anything about whether withdrawals are excludable!!!!

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

DianeW777 — Tue, 15 Feb 2022 21:04:05 GMT

Yes, contributions to your 401(k) are excludable for New Jersey (NJ) income tax. Here is an excerpt from the NJ Department of Revenue:

If you are a New Jersey resident, wages you receive from all employers are subject to New Jersey Income Tax. Wages include salaries, tips, fees, commissions, bonuses, and any other payments you receive for services you perform as an employee. You must report all payments, whether in cash, benefits, or property.

The wages you report for federal tax purposes may be different than the wages you report for New Jersey purposes. For example:

New Jersey does not allow you to exclude from wages amounts you contribute to deferred compensation and retirement plans, other than 401(k) Plans.
- NJ Income Tax - Wages
Thank you for the assist @SteamTrain. The answer has been updated.
@tcaliendo

[Edited: 02/15/2022 | 1:00p PST]

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

SteamTrain — Tue, 15 Feb 2022 20:49:22 GMT

@tcaliendo

I'm not sure which end you are coming from...contribution phase or distribution phase.

BUT

1) During the contribution phase, a NJ person contributing to pre-tax $$ to a 401k plan thru the employer's plan, does have the $$ deducted from NJ wages in box 16 of the W-2 (not talking about ROTH 401k's here)

2) when you take a "Distribution" from that 401k plan, later , for a NJ resident, those $$ are fully taxable (Unless contributions were made before 1984)

................From page 14 of the NJ Tax Topic Bulletin GIT 1&2 :

"Section 401(k) Plans
If you made contributions:
1. On or after January 1, 1984, your contributions to your 401(k) Plan were not included as income when they were made, unless the contributions exceeded the federal elective deferral limit. As a result, you must report all distributions on your New Jersey Income Tax return because they are fully taxable;

2. Before January 1, 1984, your contributions to your 401(k) Plan were included in your income when they were made. If you made contributions to a 401(k) Plan before January 1, 1984, or you made contributions beyond the federal limit, use IRA Worksheet C to calculate the taxable and excludable portions of your distribution."

____________________________________

Link to the GIT1&2 at the bottom of page here:

State of NJ - Department of the Treasury - Division of Taxation - NJ Income Tax – Retirement Income

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

SteamTrain — Tue, 15 Feb 2022 20:53:38 GMT

@DianeW777 not sure what you are trying to say here

, but the "other than 401k plans" is the part we are discussing here.

For W-2 forms, normal pre-tax 401k contributions are also exempted from NJ wages.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

fanfare — Tue, 15 Feb 2022 21:23:23 GMT

NJ goes by the taxable amount.

If you had pre-tax contributions to a 401k or other similar pension plan,

that will show up in the taxable amount being smaller than the box 1 distribution.

Otherwise, if you have to apply either of the two "Rules", then also NJ will not tax the excluded amount.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

fanfare — Tue, 15 Feb 2022 21:28:10 GMT

I figured out what was happening on my brother-in-law's W-2, so I retract my comment earlier that it is not subtracted from NJ wages.

I have no motivation to wade through all my old W-2 documents, so I concede.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

DANBRIGHT — Fri, 06 Jan 2023 13:16:58 GMT

nonsense

in NEW JERSEY ira and 401k are NOT deductible in the year those contributions are made AND ARE FULLY TAXED BY STATE OF NJ

and therefore, there is a basis

and the only thing taxable from withdrawal such as when you retire is any earnings on the 401k after contributions

however, this comment could explain why the turbo tax for nj tax incorrectly makes you pay taxes again on the basis, that is on money you were already taxed on

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

fanfare — Fri, 06 Jan 2023 21:01:03 GMT

Look at the instructions for NJ-1040

you will prorate your NJ basis in your Traditional IRA ( which requires you have the detailed records of all IRA contributions while a NJ resident).

There is nothing equivalent to prorate or otherwise account for a basis in a 401k distribution.

That's why TurboTax doesn't do it.

If NJ does deduct the 401k contribution from wages (which I conceded above), there is no issue with 401k distributions.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

Chris-Mc — Wed, 01 Mar 2023 00:31:44 GMT

I do have a situation in 1983 for 3 months where NJ taxed my contribution to my 401K plan and the feds did not. The 401K statement only accounts for the Federal tax paid contribution and not the NJ tax paid contribution. So, how do I have turbo tax account for the $1,400 that NJ already taxed me on back in 1983 just before they started using the federal pretax rules in 1984? Otherwise I will be double taxed in NJ on $1,400.

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

DianeW777 — Wed, 01 Mar 2023 15:58:56 GMT

You are correct in regards to New Jersey (NJ) allowing a reduction for retirement that was already taxed through payroll deduction. Check your 1099R and enter a lower amount for the state distribution. The worksheet in the link below will help you figure out your tax free amount for NJ for 2022.

NJ Bulletin Pensions and Annuities (start on page 8 for 401(k) information)

@Chris-Mc

Re: I contribute to my 401k before taxes. Does nj state see that as income still?

Chris-Mc — Thu, 02 Mar 2023 16:52:46 GMT

Thank you for this information. I thought I would post the following in an effort to also help others asking about the same topic.

So, I went back to my NJ return and tried to enter the amount already taxed on my 401K figuring I would get the a similar screen like I get for my IRA accounts. But like a previous poster, I could find no such option. But there was a comment stating that exclusions were handled on the federal return. I thought this was a bit odd because the excluded amount only applied for my NJ state return and not my Federal return.

So, I revisited the 1099R form on the federal return and this time I carefully paid attention to all the pop up screens. There was one that asked to enter the taxable portion for NJ. It already populated that field with what was on the 1099R form. I then changed that number to the lower number by subtracting the amount I already was taxed by NJ in 1983. I then selected the 3 year rule because all of this excluded amount would be withdrawn in 3 years.

When I did this the NJ tax/refund number on the top of the screen went from showing a large number for taxes owed to a large refund. Well, I knew that wasn't right and I thought information must be missing since TurboTax never asked me to enter baseline information on the NJ 3 year rule I selected. I still continued and when I got to the Review section, sure enough, there were a few screens that came up asking me to enter the baseline information for the NJ 3 year rule. Once I did that, the correct tax calculation appeared on the NJ return with the amount already taxed excluded.

Hopefully this description will help others in NJ that had a 401K distribution with money in the account that was already taxed by NJ prior to 1984.