NJ Income Tax — Roth IRAs
The New Jersey 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 income.
Qualified taxpayers, regardless of age, can establish a Roth IRA. Contributions can 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 a traditional IRA and reinvest them (within 60 days) in a Roth IRA if the withdrawal satisfies the federal requirements. In most cases, your contributions to a traditional IRA were already taxed by New Jersey and are not taxable when withdrawn. However, any amounts you roll over from a traditional IRA to a Roth IRA that were not previously taxed by New Jersey must be included as income on your New Jersey return the year they are withdrawn from the traditional IRA. This includes accumulated earnings and other amounts such as a rollover distribution from an employer's 401(k) Plan (both principal and earnings). If you are filing a resident return, you must report both the taxable and excludable portions of the distribution on the separate lines provided on Form NJ-1040.
Qualified Distributions From a Roth IRA
A qualified distribution from a Roth IRA is excludable from income and should not be reported anywhere on the New Jersey tax return. A qualified distribution is one made after the five-year period beginning with the first tax year for which a contribution was made to the IRA, and that is:
- Made on or after the date the individual reaches age 59½; or
- Made to a beneficiary (or the individual's estate) after the individual's death; or
- Made because the individual became disabled; or
- Made as a qualified first-time homebuyer distribution as defined by the Internal Revenue Code.
A distribution will not be treated as a qualified distribution if it does not meet the Internal Revenue Service's five-year rule. For example, if you established a Roth IRA in 2014, the first year you could receive a qualified distribution would be 2019. Contact the Internal Revenue Service
for more information on the five-year rule.
Nonqualified Distributions From a Roth IRA
A nonqualified distribution is one not made under one of the four circumstances described in "Qualified Distributions," or one that does not satisfy the IRS's five-year rule. A distribution that is considered nonqualified for federal income tax purposes is also considered nonqualified for New Jersey purposes. Because nonqualified distributions are reported as pension and annuity income, the pension and/or other retirement income exclusions
See Technical Bulletin TB-44
, Roth IRAs, and Tax Topic Bulletin GIT-2
, IRA Withdrawals.