Individual 401K deductable at state level for self employed?
For tax year 2013, I contributed to an Individual 401K and I saw it was deductible at the Federal but not my NJ state level on my tax return. This was from my self employed income. My wife, who works for a company, contributed to her company 401K and it since the contribution was pretax, it was deductible at the Federal and NJ state level. Is this correct?
Are contributions to 401Ks deductible at the Federal and NJ state level to employees while retirement account contributions (e.g. individual 401K and SEP IRA) for the self employed are only deductible at the Federal level?
Permalink Submitted by mk foss on Sun, 2014-03-23 04:08
According to the New Jersey tax return instructions there are no deductions for IRAs and self-employed retirement plans. The instructions mention a law change for 401ks that allow them to be treated the same as federal. They do provide for an exemption from tax when the retirement is paid out though. This is from skimming the instructions, you should read them carefully if you’re preparing your own return.
Permalink Submitted by Bruce Steiner on Mon, 2014-03-24 02:07
That issue went all the way up to the New Jersey Supreme Court in the Reck case. The New Jersey Tax Court held for the taxpayer: http://scholar.google.com/scholar_case?case=4932835700179321100&q=reck+v.+director&hl=en&as_sdt=4,31. The Appellate Division reversed: http://scholar.google.com/scholar_case?case=8794466497255420329&q=reck+v.+director&hl=en&as_sdt=4,31. The New Jersey Supreme Court affirmed the Appellate Division: http://scholar.google.com/scholar_case?case=8682602117134378279&q=reck+v.+director&hl=en&as_sdt=4,31.