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Another article I read stated that only one state currently taxes 401k contributions; Pennsylvania.

As a local, I can confirm that PA is the only state that does a lot of things <img src="i/expressions/face-icon-small-smile.gif" border=0>

that's good ol' NJ for ya!

Another Reason to vote for Murphy <img src="i/expressions/face-icon-small-happy.gif" border=0>


In NJ, 401k is the only exception cause other pre-tax retirement accounts such as 403(b) are taxed. But withdrawals are not taxed when you are retired.
But I'd rather get taxed when I withdraw cause the tax rate would be lower when one does not work any more.


Wouldn't this effectively turn the 401k into a roth ira? what else are the differences?

[Q]Wouldn't this effectively turn the 401k into a roth ira? what else are the differences?The way FEDERAL taxes are levied.

Currently I assume NJ taxes you when you withdraw from a 401K. If they change to start taxing the money up front, what happens to all the money already invested pre-tax? Would they grab a lump sum from it equal to the tax on the current value? Otherwise it becomes a bit of a mess as to how to figure out in the future how much taxes you owe.

LordKronos said: [Q]Currently I assume NJ taxes you when you withdraw from a 401K. If they change to start taxing the money up front, what happens to all the money already invested pre-tax? Would they grab a lump sum from it equal to the tax on the current value? Otherwise it becomes a bit of a mess as to how to figure out in the future how much taxes you owe.

I think they will keep track of the basis of the account just like the non-deductable IRA.

I wonder what happens if you work in PA which taxes 401k contributions and retire in NJ. Do you get taxed again?

I live in NJ but work in PA and I wonder how they are going to tax me on my 401K when I technically don't pay NJ state tax.


what?? PA taxes 401k contribution??? how?

KrayzyAzn said: [Q]what?? PA taxes 401k contribution??? how?

sorry for any confusion. PA does not exclude your 401k contributions from taxable income. For ex: you make $60,000 and contribute $10,000 to your 401k. Your PA taxable income is $60,000. It does not tax retirement distributions.

So the question is what happens if I retire and move to a state that taxes retirement distribution?

bbz said: [Q]So the question is what happens if I retire and move to a state that taxes retirement distribution? You get taxed twice

Treefarn said: [Q]Link

Another article I read stated that only one state currently taxes 401k contributions; Pennsylvania.

It only mean the state has overspent and now looking for other options to tax people. This is criminal as 401K is many's retirement fund. <img src="i/expressions/face-icon-small-sad.gif" border=0>

vkl168 said: [Q]I live in NJ but work in PA and I wonder how they are going to tax me on my 401K when I technically don't pay NJ state tax.

Mmmm...aren't u supposed to be paying NJ Income Tax?

many states tax traditional IRA contributions too.

vkl168 said: [Q]I live in NJ but work in PA and I wonder how they are going to tax me on my 401K when I technically don't pay NJ state tax.

Actually there is an agreement between PA and NJ that NJ residents working in PA are not taxed by PA.
Take a look at page 37 of this document
http://www.state.nj.us/treasury/taxation/pdf/other_forms/tgi-ee/2004/041040i.pdf

Since we're on the question of Roth IRA's, may I ask a question?
If I buy into a traditional IRA in the 2005 year (for 2004 tax year purposes), and then convert that into a Roth, I know I'll pay taxes. With a lower tax rate, I would not see this as a problem.
However, is there a minimum date I must wait between the conversion? Also, would the IRS define this as abuse of the tax system as I have effectively circumvented the reason why they have a penalty fee in the first place?
What I mean by that is, once converted into a Roth IRA there are several methods of using the funds while not paying the Age 59 1/2 retirement age penalty. Those methods include buying a home, paying for medical expenses >7.5% of AGI, college expenses, etc, etc.

SeriusBlack said: [Q]... once converted into a Roth IRA there are several methods of using the funds while not paying the Age 59 1/2 retirement age penalty. Those methods include buying a home, paying for medical expenses >7.5% of AGI, college expenses, etc, etc.

You can do the same with traditional IRA. In fact, you may be better off with tIRA.

The new governor wants to screw us all in the behind, McGreevy only did that with his homeland security advisor. <img src="i/expressions/face-icon-small-happy.gif" border=0>

Time to vote with your pretty feet-- move south.

So if someone works in PA (or NJ), 401K contributions will get taxed. What happens if they retire in CA (where residents are taxed when they withdraw from 401K)? Doubly taxed?



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