457(b) plan contribution and NJ Taxes

Forum|Forum|6 years ago
June 6, 2019
2 replies
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I work in NY State Government and live in NJ. They do not have a 401K program, but do have 457(b) where I contribute. NJ is charging me tax on my contribution. Any way to avoid this tax from NJ? I am close to retirement age.

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ChristinaS

Employee

NJ taxes public retirement plan contributions, health insurance, Flexible Spending, Health Savings Accounts, and more. Because its supposed to be taxed, you can't really avoid this. Everyone with a 457(b) or 403(b) is taxed for NJ purposes.

When you begin to receive distributions, they will be reported on Form 1099-R. On your NJ tax return, you will recover your contributions tax free. You will either be taxed using the Three Year Rule or the General Rule, which you will determine when you start collecting the retirement. Either way, you will not pay taxes on your contributions again.

You can see some info starting on page 4-

http://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git1.pdf

Whether you use General Rule or Three Year may depend on how much you will collect in comparison with your contributions, and whether your employer (aka the NJ government) also contributed.

But, no, there's nothing you can do to avoid being taxed on the contributions now. That is simply a fact of NJ taxation.

NDfromNY

Thanks for your post - I would like to ask a follow-up question.

I am exactly in the situation, I live in NJ and work for NY state.

What would happen if after I retire, end up moving to a different state where both 457(b) contributions and gains (hopefully) are taxed? Will that state somehow know that my contribution was taxed already by NJ and give me credit for that?

Thanks,

PaulaM

Employee

You've posted on an old thread @NDfromNY . Please post a new question so that we can assist you.

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