27 May Do you really have to report Roth IRA distributions as income?

Q. Do I have this all right? It has been previously reported that New Jersey is now requiring Roth IRA distributions to be included in income for property tax relief purposes “as if they were from a regular IRA.” Also, I don’t understand including “the amount rolled over … to another Roth IRA”. It seems totally unfair to count such transfers between custodians as income, and this also may make the calculations for subsequent Roth IRA withdrawals confusing.
— Taxpayer

A. This is an issue that’s surprised many New Jerseyans.

You’re probably not going to like the answer.

The short answer is yes, you need to include Qualified Roth IRA Distributions/Withdrawals in determining “Income Limits” for purposes of the property tax relief program, said Gerard Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.

Form PAS-1 specifically states “the amount of any qualified distribution from a Roth IRA or the amount rolled over from a Roth IRA to another Roth IRA” is included in Income for purposes of Form PAS-1.

Pursuant to IRS Publication 590-B, a “qualified distribution” from a Roth IRA is for Roth IRAs that have been open for at least five tax years since the first contribution was made.

Eligible Distributions:
— Account owner Attains age 59 ½
— If Account Owner is total and permanently disabled
— First-time Home Purchase of a Primary residence up to $10,000 Lifetime Limit
— Account owners’ death
— Other Specific Circumstances such as hardship, emergency expenses, qualified education expenses

Contributions made to Roth IRAs are not required to be included as income for purposes of Form PAS-1 as contributions are made with after-tax dollars and never subject to tax, Papetti said.

“I also find it interesting and not clear as to why the `amount rolled over from a Roth IRA to another Roth IRA’ is included in `income’ for purposes for NJ Form PAS-1,” Papetti said.

(We here at NJ Money Help are willing to guess it’s because fewer people would be eligible for the maximum benefits.)

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This story was originally published in May 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.