Is NYS IRC 414H subject to NJ income tax?

[Mac1287]

Filing both NY non-resident and NJ resident state returns.

I know the IRC 414H retirement contributions are subject to NYS tax as the taxpayer is a NY City Employee. This amount has been correctly added back to the Federal income for NY tax return calculations.

However, are these contributions also subject to NJ tax, even though these contributions were made from NY-based wages? There is no income at all from NJ sources. Turbotax is recommending adding it back to calculate the NJ taxable income. 

I've only seen discussions here regarding NJ 414H contributions and based on what I've read, those are not subject to NYS taxes so just wondering if the reverse is true.

Thanks in advance

[LenaH · Accepted solution]

The NYS 414(h) is subject to NJ income tax. New Jersey does not allow you to exclude from wages amounts you contribute to deferred compensation and retirement plans, other than 401(k) Plans. Since you are a New Jersey resident, you are subject to income tax on all of your earnings, no matter where they are earned. 

NJ Income Tax - Wages

[Mac1287]

Thank you @LenaH,

I figured as much but thank you very much for confirming. 

[amandanl9]

So you have to pay state taxes in both NJ and NY for the 414H contributions?  Isn't that a double taxable for both states?

[JamesG1]

In such cases, you may qualify for a Credit for Taxes Paid to Other Jurisdictions.

This New Jersey Division of Taxation website states:

Credit for Taxes Paid to Other Jurisdictions

If you are a New Jersey resident with income from sources outside New Jersey, you may be eligible for a credit on your New Jersey tax return. You may qualify for a credit if you paid income or wage tax on the same income in the same year to both New Jersey and to another jurisdiction outside New Jersey.

@amandanl9 

[amandanl9]

Thank you.