NJ 2024 Part-Year Resident -"Excludable" Pension Payments

[GGBJr]

I moved to NJ from Texas during the first quarter of 2024. Half of my RMD was payed out to me in January of 2024.

On NJ-1040 P2, line 20b states that "Excludable Pensions/IRA Distributions" were one half of my total federal RMD distributions.  The amount is not included in line 27 Total Income, whereas dividend income and net capital gains are.

On the Pensions Wks - TP column A shows my gross distributions for federal purposes.  Column B shows the same amount for Federal Taxable Amount.  Column C (for Part-Year NJ Resident) shows half the federal amount that was received during my NJ residence.

Does all of this make sense?

[BillM223]

That may be correct.

New Jersey does not exclude a lot of contributions to IRAs and pension from income, so, in general, you don't have to include this income in NJ taxable income when you take it back out. This is much different from the federal return where because most contributions to pensions and IRAs are not taxable, then the distributions are taxable.

But it depends on whether or not the money going into the pension fund or IRA was taxed in NJ in the first place.

Take a look at Retirement Income and see if this makes sense.

[GGBJr]

I appreciate your very rapid response!  

I read the article to which you referred.  I did not realize that NJ lets one exclude $150,000 of IRA income for tax purposes.  But, I read elsewhere that that this only applies if "total income is less than $100,000."  This appears to be a non sequitur.  Does this mean that IRA distributions are not included in total income?  Otherwise, this is saying that one is permitted to exclude $150,000 on your NJ tax return, but you really can't, because your income is greater than $100,000 (assuming that the distribution is greater than $100,000).  I have been unable to locate a description of what constitutes total income.  However, TT computes NJ-1040 P2, and I have to assume that it knows what it is doing.  

Since my IRAs were formed and contributed to while I was a long-term resident of Texas, could this be the reason?  Maybe TT knows this, but maybe it doesn't?  However, being a TT user for about twenty or so years, my batting average is not very good when I have believed TT to be in error in a matter!

[BillM223 · Accepted solution]

It is only an apparent non sequitur. New Jersey says

Traditional IRA The New Jersey Gross Income Tax Act does not contain any provisions similar to the Internal Revenue Code that allow an individual to deduct contributions to an IRA. Contributions to an IRA are subject to New Jersey Income Tax in the year they are made. When you make a withdrawal from an IRA, the amount you contributed is not taxable, since the contributions were already taxed.

You see, only the earnings in that $150,000 IRA distribution is taxable, not the part of the $150,000 that you put into it. So it could happen that your earnings might be $80,000 on $70,000 of contributions (enter your own numbers here). In this example, the $80,000 would be taxable in NJ, not $150,000.

As for the IRA contributions made in Texas, NJ says that any IRA contributions made before you moved to New Jersey are treated as if you made th... i.e., as if they were already taxed on the way in, so not taxable on the way out.