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State taxation of 401K contributions?

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5 replies to this topic

#1 simbarat


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Posted 12 March 2002 - 12:47 PM

I heard/read somewhere that a dozen or so states, including PA where I live, tax a certain portion of your 401K contributions. Is this true and does anyone know where online I could find more info on this?

Contributions should be pre-tax (unless owner specified) under both Fed and State taxation...correct?

#2 stephen


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Posted 12 March 2002 - 01:31 PM

You may have seen a reference to non-conforming for EGTRRA states. There is an update from BenefitLink last week regarding these states.

The issue is some states do not automatically conform to new IRS laws. These states may not recognize the increase in limits for deferrals, catch-up contributions for over age 50, etc.


#3 mbozek



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Posted 12 March 2002 - 01:50 PM

My understanding is that PA taxes the salary reductions to 401(k)/403(B) and 125 plans. Wages subject to PA tax are taken from line 16 of the w-2 form, state wages. States are not required to use the same definition of wages as the federal govt uses.

#4 Guest_named_b2kates_*

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Posted 12 March 2002 - 04:52 PM

I agree with mbozek regarding pa taxation.

the flip side benefit is that when funds are distributed from a qualified plan to a Pa resident the distribution is not taxed.

#5 dmj1998


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Posted 13 March 2002 - 12:17 PM

simbarat - you may want to check out the PA Dept. of Revenue site for more detail:


#6 IRC401


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Posted 16 March 2002 - 04:28 PM

PA taxes 401(k) and 403(B) elective deferral contributions. It does not tax 125 salary reductions for medical care but does tax 125 salary reductions for dependent care.

I am not aware of any other states that tax 401(k) contributions (for reasons not related to EGTRRA). Last time I checked there were municipalities in Ohio that taxed them and (if my memory is correct) some transit authority in Oregon. [ I do not pretend to have any expertise re: Orgeon tax rules.]