If I convert my 401(k) to a Roth, is it taxed by N.J.?

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Q. I am 70 years old and am considering converting a portion of my 401(k) to a Roth 401(k). Does the Roth conversion count as retirement income for the New Jersey retirement income exclusion?
— Trying to save

A. The instructions for the NJ-1040 form give you everything you need to know, and if you follow the instructions, the income can be excluded under the pension exclusion, said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.

The form says:

“If you converted an existing IRA to a rollover Roth IRA during tax year 2022, any amount from the existing IRA that would be taxable if withdrawn must be included on line 20a which is taxable pension, annuity and IRA distributions/withdrawals.”

“Line 28a – Pension/Retirement Exclusion: You can exclude all or part of the income reported on line 20a if you meet the following qualifications: You (and/or your spouse if filing jointly) were age 62 or older or blind/disabled as defined by Social Security guidelines on the last day of the tax year; and based on income limits.”

It says if you are married filing jointly with less than $100,000 of income, you receive up to $100,000 exclusion or the pension income amount – whatever is less. For income between $100,000 and $125,000, it drops to 50%, and between $125,000 and $150,000, it drops to 25%.

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This story was originally published on Jan. 26, 2023.

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