NJ -- overtaxed state in US.

[commuter]

I moved from NY to NJ last year. I just did my NJ tax return and find out that in NJ all the 401k/403b contributions are NOT EXEMPT from NJ state tax. What is going on? when did this happen?

[Stinky]

I'm not sire that's right. See page 7 of this document from the State's web site. http://www.nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git1.pdf

[commuter]

stinky, what the link you gave is for people take out pension or retirement money.
what I mean is if one is cotributing to retirement plan while he is working NOW, the contributed money is exempt from federal tax.

[Stinky]

Yes but under point 1 it says:

"If all contributions to your 401(k) Plan were made after 1/1/84 none of the contributions were included in gross income when they were made..."

If the contributions were not included in gross then you didn't pay tax on them.

Right? Or am I misreading/misinterpreting that?

[commuter]

On your w-2, if you have any thing in box 12, does box 1 has the same amount as box 16(state taxable income)?

[Lenin]

commuter,

You are correct. There is no comparable deduction against NJ state income tax for retirement plan contributions.
However, when you receive your benefits, you are taxed only on the amount that your money has earned over and above your contributions.

Of course, if you are working in NY and LIVING in NJ, you will still get the bulk of the benefits of deductibility against your New York State tax. And those living AND working in NJ will get the benefit of far lower state tax rates in NJ over NY.
So, as far as income tax goes, NJ is a FAR better deal. Alas, the same cannot be said for real estate taxes...unless yours are abated like Lefrak.