Roth IRAs
The New Jersey gross income tax treatment of Roth IRAs conforms to the Federal treatment. Direct contributions to Roth IRAs are not deductible and qualified distributions from Roth IRAs are not includable in New Jersey gross income.
Qualified taxpayers, regardless of age, may be able to establish a Roth IRA. Contributions may be made either directly or rolled over from a traditional IRA. Contact the Internal Revenue Service to see if you qualify.
Rollovers. You can withdraw all or part of the assets from an existing traditional IRA and reinvest them (within 60 days) in a Roth IRA if you satisfy the Federal requirements. In most cases, your contributions to a traditional IRA were previously taxed in New Jersey. However, accumulated earnings in a traditional IRA have not been previously taxed and must be included in New Jersey gross income in the year they are withdrawn. Also, any amounts rolled over from a traditional IRA to a Roth IRA which were not previously taxed by New Jersey, such as a rollover distribution from an employer's 401(k) plan, must be included in New Jersey income (both principal and earnings) in the year the funds are withdrawn from the traditional IRA.
Qualified Distributions from a Roth IRA
A qualified distribution from a Roth IRA is excludable from gross income and should not be reported anywhere on the New Jersey income tax return. A "Qualified Distribution" is one which is made after the five-taxable-year period beginning with the first taxable year for which a contribution was made to the Roth IRA, and which is made:
Nonqualified Distributions from a Roth IRA
A nonqualified distribution is one which is not made under one of the four circumstances described in "Qualified Distributions," or one which does not satisfy the IRS's five-year rule. A distribution which is considered nonqualified for Federal income tax purposes is also considered nonqualified for New Jersey income tax purposes.
Taxable portion. In the case of a nonqualified distribution from a Roth IRA, taxable amounts withdrawn are reported on the New Jersey tax return as taxable pension and annuity income. The New Jersey taxable portion of a nonqualified distribution from a Roth IRA is calculated in the same manner as a distribution from a traditional IRA, using the IRA worksheet.
Exclusions. Because nonqualified distributions are reported as pension and annuity income, the pension and/or other retirement income exclusions may apply.
For more information on IRA withdrawals, view Technical Bulletin TB-44, Roth IRAs, and Tax Topic Bulletin GIT-2, IRA Withdrawals. To view them you must have the Adobe Acrobat viewer which is available free from Adobe. Click the link to learn more about Adobe Acrobat or to download the latest version of the viewer.
Qualified taxpayers, regardless of age, may be able to establish a Roth IRA. Contributions may be made either directly or rolled over from a traditional IRA. Contact the Internal Revenue Service to see if you qualify.
Rollovers. You can withdraw all or part of the assets from an existing traditional IRA and reinvest them (within 60 days) in a Roth IRA if you satisfy the Federal requirements. In most cases, your contributions to a traditional IRA were previously taxed in New Jersey. However, accumulated earnings in a traditional IRA have not been previously taxed and must be included in New Jersey gross income in the year they are withdrawn. Also, any amounts rolled over from a traditional IRA to a Roth IRA which were not previously taxed by New Jersey, such as a rollover distribution from an employer's 401(k) plan, must be included in New Jersey income (both principal and earnings) in the year the funds are withdrawn from the traditional IRA.
Qualified Distributions from a Roth IRA
A qualified distribution from a Roth IRA is excludable from gross income and should not be reported anywhere on the New Jersey income tax return. A "Qualified Distribution" is one which is made after the five-taxable-year period beginning with the first taxable year for which a contribution was made to the Roth IRA, and which is made:
- On or after the date on which the individual reaches age 59½; or
- To a beneficiary (or the individual's estate) after the individual's death; or
- Because the individual becomes disabled; or
- As a qualified first-time homebuyer distribution as defined by the Internal Revenue Code.
Nonqualified Distributions from a Roth IRA
A nonqualified distribution is one which is not made under one of the four circumstances described in "Qualified Distributions," or one which does not satisfy the IRS's five-year rule. A distribution which is considered nonqualified for Federal income tax purposes is also considered nonqualified for New Jersey income tax purposes.
Taxable portion. In the case of a nonqualified distribution from a Roth IRA, taxable amounts withdrawn are reported on the New Jersey tax return as taxable pension and annuity income. The New Jersey taxable portion of a nonqualified distribution from a Roth IRA is calculated in the same manner as a distribution from a traditional IRA, using the IRA worksheet.
Exclusions. Because nonqualified distributions are reported as pension and annuity income, the pension and/or other retirement income exclusions may apply.
For more information on IRA withdrawals, view Technical Bulletin TB-44, Roth IRAs, and Tax Topic Bulletin GIT-2, IRA Withdrawals. To view them you must have the Adobe Acrobat viewer which is available free from Adobe. Click the link to learn more about Adobe Acrobat or to download the latest version of the viewer.
