Hello r/pf,
I was going through my PA state tax return for the year and I came across information that might be useful from a planning perspective if you're a Pennsylvania resident, a nonresident otherwise subject to Pennsylvania taxes, or a person who is planning on retiring in Pennsylvania.
- Traditional 401(k) and IRA Contributions are not deductible from income for Pennsylvania State Tax in the year of contribution.
- Distributions taken from such accounts prior to reaching age 59.5 are taxable to the extent that distributions exceed cumulative contributions (similar to Roth IRA rules for Federal Tax purposes). After that time, these amounts are not included in income.
- Amounts rolled over from Traditional to Roth Accounts are not included in income for Pennsylvania Tax purposes.
In short, for Pennsylvania Tax Purposes, Traditional retirement accounts for Federal Tax purposes are treated nearly identically to Roth accounts. I can find no discernable differences.
This means that you could potentially pay zero state income tax on Traditional 401(k) and IRA amounts if you make those contributions in other states that allow for such deductions and subsequently move to Pennsylvania. Alternatively, if you make such contributions while you live in Pennsylvania and move to another state, you could potentially be taxed twice for such contributions. This isn't intended to insinuate that the 3.07% flat tax on income in Pennsylvania is enough, in isolation, to make decisions about saving/living in retirement; I'm merely positing it as something to consider for planning purposes.
Hope this was informative!
Submitted March 04, 2019 at 09:00AM by tdpdcpa https://ift.tt/2UjF9sv
