state tax on IRA distributions

Submitted by bud carbonaro on Thu, 2014-03-27 17:38

Hello I am new to this forum and had a question on ira distributions.. I lived in NJ until 2010 and NJ does not allow you to tax defer IRA contributions.. so all of my ira contributions were taxed at the state level while a NJ resident. all contributions were made after 1987. Now I live in CA and I find the instruction on creating a CA IRA basis confusing. My opinion is that since I paid state tax on my ira contributions in NJ.. that all my ira contributions that are eventually distributed should be tax free at the state level or be my ira basis. Yes?? I hope I am not in a situation that the ira contributions will be double taxed.. when it went in while in NJ and taxed again coming out in CA..



Submitted by mk foss on Sat, 2014-03-29 01:31

CA formerly had a rule that your basis in an IRA was the FMV when you moved into the state. They changed that a few years ago to use the federal rules. I’m not sure that the law addresses this type of situation. The FTB has a publication on taxation of retirement plans. Go to ftb.ca.gov and look for publication 1005 – it’s updated every year.

Submitted by Alan - IRA critic on Sat, 2014-03-29 03:51

  • Here is the link to Pub 1055 – see p 5.  Looks like any particular basis from NJ cannot be used, but you also might have made some pre 1987 contributions that would have been non deductible under CA law and you could use that basis.  https://www.ftb.ca.gov/forms/2013/13_1005.pdf
  • Both of these states would probably have done things differently if they knew this mess would create this much conplexity for taxpayers as well as the tax agencies.

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