New Jersey Tax on TSP 401-k Withdrawal

Forum|Forum|6 years ago
February 8, 2020
9 replies
117 views

I took a $50K cash withdrawal from a qualified 401-k Thrift Savings Plan (TSP) that I started in 2003. I am married, filing jointly. No NJ tax withheld on 1099-R, Box 12. Should I use the "General Rule" in TurboTax: "select the source of the distribution?

Thanks for any advice.

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JFRAHER

Level 7

No your 401k distribution is fully included in NJ income. Contributions made on or after January 1, 1984, were not taxed when they were made. If all of your contributions were made on or after that date, your distributions are fully taxable.

JohnsonCharlieAuthor

Level 2

JosephF8, I actually did pay New Jersey income tax on all my 401-k contributions each year. Now I am being taxed on the full amount of my withdrawal. Can I avoid this double taxation? Thanks for your help.

JFRAHER

Level 7

Unless you will recover all of your previously taxed contributions within 3 years you would need to use the general rule. Please note the following.

From the NJ instructions:

401(k) Plans

1. Contributions made on or after January 1, 1984, were not taxed when they were made. If all of your contributions were made on or after that date, your distributions are fully taxable unless your contributions exceed the federal limit. If your contributions exceed the federal limit, you must calculate the taxable and excludable portions of your distributions using one of the methods described under contributory plans.

2. Contributions made before January 1, 1984, were taxed when they were made. If you made contributions before that date, you must calculate the taxable and excludable portions of your distributions using one of the methods described under contributory plans.