Are 401(k) distributions taxable in New Jersey?

Distributions from a 401 (k) may or may not be taxable at the state level. Currently there are nine states with no state income tax on any type of income. Additionally, there are three other states that have a state income tax but do not tax retirement distributions. Unfortunately, New Jersey is not one of these states.

Are 401(k) distributions eligible for New Jersey pension exclusion?

A. New Jersey, known for its high taxes, enacted the pension exclusion as incentive for retirees to stay in the state. Yes, your 401 (k) distributions are eligible for the pension exclusion if you otherwise qualify, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

Are IRA contributions taxable in New Jersey?

In general, IRA contributions were taxed when you made them and are not taxed by New Jersey when withdrawn. However, amounts rolled over into your IRA from tax-deferred pension plans that qualify for federal tax deferral are taxable upon withdrawal, since the money was never previously taxed.