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Returning Member

Illinois Pension Distribution - 401(k) conversion to Roth 401(k)

Illinois allows a deduction for pension distributions. In 2019, I converted a large portion of my employer 401(k) to Roth 401(k). I received a 1099-R for the conversion. The distribution code assigned was G. I know this is taxable on the federal level, but does a conversion count for the Illinois pension distribution deduction? 

4 Replies
Employee Tax Expert

Illinois Pension Distribution - 401(k) conversion to Roth 401(k)

Please see  page 3 of Publication 120 - Illinois.gov where a conversion may not be deducted. In case I am not understanding your situation, you have the official publication.

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Returning Member

Illinois Pension Distribution - 401(k) conversion to Roth 401(k)

Hi Amy,

Thank you for your reply. I do have a follow-up question. Based on the form that you provided, a rollover or conversion ( (I am not sure what the proper term is for a qualified 401k) from a qualified 401k to a Roth 401k does not seem to be included on the list that cannot be subtracted. In fact, in the section on pg 3 titled "What must I attach to my Form IL-1040 when I subtract retirement income on Line 5?" it includes conversions from traditional IRA to Roth IRA, which seems to indicate that a rollover/conversion of a traditional 401k to a Roth 401k would therefore also be allowed. Please let me know if that makes sense. I appreciate your help!

Employee Tax Expert

Illinois Pension Distribution - 401(k) conversion to Roth 401(k)

I would not call this an early distribution, which is qualified. Your code G is really bothering me because that is a rollover to the same type of plan and means not taxable. So I am really struggling. A code H would have been right for after tax rollover to Roth IRA. Those would not have tax penalties. Only a conversion makes sense for taxes to be paid. I think you did both a rollover and a conversion. They seem to allow pretty much everything to count and this is a distribution from a qualified plan. Now, after weighing more variables, I would personally count it. Page 2 has the word qualified on everything and yours is a qualified plan. Go forth and enjoy!

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Returning Member

Illinois Pension Distribution - 401(k) conversion to Roth 401(k)

Thank you!

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