Magazine article The CPA Journal

Distributions from Section 457 Plans Eligible for New York Pension Exclusion

Magazine article The CPA Journal

Distributions from Section 457 Plans Eligible for New York Pension Exclusion

Article excerpt

The Economic Growth and Tax Relief Reconciliation Act of 2001 changed the treatment of distributions made from government section 457 plans through the addition of IRC section 3401(a)(12)(E). Effective for taxable years beginning on or after January 1, 2002, distributions made from government section 457 plans will be characterized for federal purposes as pension or annuity payments. Distributions from government section 457 plans had previously been characterized as wages.

This change in the characterization of distributions from government section 457 plans from wages to pension or annuity income permits the exclusion of all or a portion of a distribution from a government section 457 plan from New York taxation. Under N.Y. Tax Law section 612(c)(3-a), an individual who is over the age of 59 1/2 may exclude up to $20,000 of eligible pension and annuity included in federal adjusted gross income from the computation of total New York income. Distributions from government section 457 plans now qualify for this exclusion. …

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