Planning for 401K contributions two 2 non resident states.

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a_movable_life
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Planning for 401K contributions two 2 non resident states.

Post by a_movable_life » Thu May 09, 2019 8:28 am

As usual I tried Google before asking this. Thank you all for your patience and advice.

How are deductions for 401K/Ded. IRA/HSA calculated when you have two states income in the same year? I’m a SD resident who did temp work in NJ, and will possibly be accepting a second temp job in NV which has no state income tax.

I'm a non-resident for both states.

In 2018 I only worked as a temp in NJ so no problem. Maxed out the EmployEE and what I could of the EmployER, Deducted this on my NJ tax return as per the rules.

This year I worked for three months in 2019 in NJ. Maxed out my EmployEE side of a Solo 401k. Plan to contribute the 20% at tax time in March/April of 2020 to max out the EmployER side of things.

1. If it’s done as a percentage divided among the two states then I need to send more money into NJ for my Estimated Payments.
2. For obvious reasons I would like to get the maximum deduction off my NJ taxes, since the money earned in NV will not be subject to State tax.
3. I can contribute an estimated amount of the EmployER now.

niceguy7376
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Re: Planning for 401K contributions two 2 non resident states.

Post by niceguy7376 » Thu May 09, 2019 9:22 am

COuld you clarify the following:

What is your setup? S Corp or Sole Prop.

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a_movable_life
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Re: Planning for 401K contributions two 2 non resident states.

Post by a_movable_life » Thu May 09, 2019 9:25 am

Sole Prop.

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grabiner
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Re: Planning for 401K contributions two 2 non resident states.

Post by grabiner » Thu May 09, 2019 8:58 pm

NJ does not allow a deduction for contributions to an IRA or HSA, so you can ignore this particular timing issue. (As a non-resident, you will have to report HSA income on your NJ taxes to determine your overall tax rate, but the income itself won't be taxed by NJ.)
Wiki David Grabiner

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a_movable_life
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Re: Planning for 401K contributions two 2 non resident states.

Post by a_movable_life » Fri May 10, 2019 8:35 am

Thank you again for answering my questions.

This is specifically about the 401K, which I thought is deductible in NJ. Do you want references? I hope I did not make a mess of this. Maybe I am using the wrong keywords to search for this?

The only thing that is for some reason. It's one of the reason why I wanted to switch from working for typically non-profit hospitals and their 403B's and to for profit companies and their deductible 401K's, I'm a 1099 employee now so I have a i401K with a plan to FIRE so I am putting in the 20% plus the 19K.

Right now I worked 3 months and maxed out the EE side in NJ. I did not plan on working the rest of the year but this job came along in Nevada and I want to try living there for a while and the job sounds interesting, and a slower pace.

When I only worked in NJ like last year the 401K Employee and Employer contributions are deductible. That's what I think the instructions state or I made a huge mistake. Which I need to fix asap. ("2018 Form NJ-1040NR Line-by-Line Instructions", P. 15, 2018)

This year I will have worked about 50% of my income in NJ and then 50% in Nevada. I can't find anything to figure out how to divide those contributions since in total the ER and EE will be about 48-49K. Which will make my estimated withholding too small for NJ.

I could just ramp up my Estimated NJ contributions to cover 53K of NJ income at full rate with no deductions, and have an accountant figure it out next Spring. Nevada has no State tax so all of these calculations are not needed for that state. My home state has no income tax as well.

I'm a non resident of NJ so I am not sure there is an advantage of putting the ER money in NOW instead of at Tax time 2020?

Thanks again. Again that last post was a gigantic help.

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grabiner
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Re: Planning for 401K contributions two 2 non resident states.

Post by grabiner » Fri May 10, 2019 6:56 pm

money_bunny wrote:
Fri May 10, 2019 8:35 am
This is specifically about the 401K, which I thought is deductible in NJ. Do you want references? I hope I did not make a mess of this. Maybe I am using the wrong keywords to search for this?
You mentioned all three, so I wanted to clarify that the other two didn't matter. The 401(k) is deductible, and 401(k) employee contributions are subtracted from your W-2 income for the state which you reported at the time you made them. I don't know how NJ will treat the employer contribution on your business income tax; it is irrelevant on your personal tax because it is not part of your salary.
Wiki David Grabiner

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