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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I started withdrawing from my 401K account this spring, at

Customer Question

I started withdrawing from my 401K account this spring, at age 65 and a half, when my employer retired me. I have withdrawn about 20,000 this year. Will that be taxable income I will have to pay on for my PA State income tax this year ?
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: not to my knowledge
Submitted: 5 months ago.
Category: Tax
Expert:  Lane replied 5 months ago.

Hi. My name's Lane .. I can help here.

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Pennsylvania generally does not charge income tax on distributions from a 401(k) plan, as long as you receive those distributions after age 59 1/2. This makes Pennsylvania different from the federal government and most other states, which tax all 401(k) distributions (sometimes with some retirement breaks)

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But Pennsylvania's tax treatment of 401(k) plans is essentially the opposite from the federal system's. In Pennsylvania, your 401(k) contributions are fully taxable in the year you make them. Investment profits are still tax-free. Then, when you reach the eligible age of 59 1/2, your distributions OF your CONTRIBUTIONS are completely non-taxable by the state.

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HOWEVER, your plan administrator should be able to tell you whether your distributions have exceeded your contributions and, if so, by how much.

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You would include the taxable amount on Line 1a of Form PA-40, the Pennsylvania personal income-tax return.