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austin3515

403b Contributions in New Jersey

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Can someone speak to whether or not contributions to a 403b plan are tax deductible for a New Jersey resident?

someone is saying that they New Jersey does not recognize the deduction for 403b plans, but does for 401k plans.  Yet I have plenty of New Jersey customers and this has never come up--much less the issue of basis that people would have in their accoounts. 

It could even get messier if for example they do not get the deduction in New Jersey and then they move to  California to retire, and take the money out and pay California tax on the way out.

This just cannot be.

On a similar note, I heard the same thing about 457b plans.

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I may be misreading it but maybe they are talking about post-retirement employer contributions?  Frankly the text doesn't make 100% sense to me but that might be the source of confusion; I believe that regular 403(b) contributions are indeed deductible.

https://www.state.nj.us/treasury/taxation/section403.shtml

FWIW, NJ does not recognize contributions other than 401(k) for self-employeds.  Someone might be conflating that.  Or I could be wrong...

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Yeah we saw that too, but we have no idea what it means either.  I don;t know what a post-retirement contribution to a 403b is, and I work with 80 403bs.   It must mean something though and that's what is so annoying.

What do you think abut the 457b aspect of it?

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I remember looking into this once upon a time. Perhaps what they are talking about (and I didn't open the link to read it, so I am just speculating based on the "post retirement contributions" comment - 1.403(b)-4(d) deals with contributions for former employees. Under this section, the employer can make NONELECTIVE contributions based upon the “deemed monthly compensation” that the employee would be deemed to receive for up to 5 years after the end of the tax year in which the employee terminates employment. This would NOT permit elective deferrals – only an employer contribution – which could well be part of a severance package – the employer offers, for example, to contribute (x% or x$) to the employee’s 403(b) account for the next (x) years as part of the severance package.

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New York provides an exclusion for up to $20,000 a year in pension income.  Periodic distributions from a 403(b) contract or a governmental 457(b) plan can count as pension income.  See page 18 in the Instructions:  https://www.tax.ny.gov/pdf/current_forms/it/it201i.pdf

For Pennsylvania's personal income tax, a retirement benefit does not count in compensation, and so does not count in income.  But not every distribution from a 403(b) or 457(b) is a retirement benefit.  Pennsylvania law looks to whether the distributee met a retirement-age or service condition.  A distribution after separation-from-service to a 60-something can be a retirement benefit.

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On 11/30/2018 at 2:51 PM, Belgarath said:

the employer can make NONELECTIVE contributions

Yes, that's what I understood the post-retirement contributions to be.

On 11/30/2018 at 5:10 PM, Slider said:

There's no NJ income tax exclusion for deferrals into a 403(b). 

Wow, that's how I read what I saw but I didn't believe it.  I knew about the weird twist for self-employeds, that they don't get PS deductions, but this is...weird.  I thought it might be a drafting error but living in NJ, it is not all that unbelievable.

On 11/30/2018 at 2:35 PM, austin3515 said:

What do you think abut the 457b aspect of it?

Sorry, I got nuthin'.  Appears to be the same though.

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