New Jersey and 401k --- what is correc?

[mppsu2003]

In filing my taxes this year I was trying to determine the 401k CARES withdrawals and how it relates to New Jersey.  A prior post led me to the 'general rule' section and it seems like that worked.  However, I am struggling to understand how New Jersey isn't taxing twice for 401k withdrawals.

In 2018 I took a withdrawal to help with a home purchase, so there were no COVID-related exceptions.  But NJ is adding the contributions to my income already (hence the higher state income on the W2) and then taxing the withdrawal as that was added to my income in 2018.  So aren't I being taxed twice?  I followed TurboTax in 2019 when filing and it wasn't clear that I should be doing something else, ultimately that's on me.  But it certainly seems like I paid tax twice on that amount for the state.

[fanfare]

[ Update: It's come to my attention that you do get a deduction in NJ for a 401k contribution.

That's not how I remember it from my pay stubs and W-2 from long ago. But I will stand corrected. ]

In a way you are taxed twice because you get no deduction in NJ for a 401k contribution.

The NJ amount on your W-2 is income and you pay income tax.

The amount on your 1099R is a distribution. You took money out of your 401k and you have to pay tax on that.

If you take from your 401k before age 59 1/2, then there is an additional federal penalty of 10% on your federal tax return. Only in 2020 can you avoid that if you claim to be affected by COVID.

The general rule and the three-year rule are for pensions. A 401k is not a pension.

Once you reach age 62 the NJ pension exclusion will help you avoid double taxation, if you qualify.

[ Update: It's come to my attention that you do get a deduction in NJ for a 401k contribution.

That's not how I remember it from my pay stubs and W-2 from long ago. But I will stand corrected. ]