Are IRA distributions subject to Pennsylvania state tax because I am still working?

by Virgil A. Kahl, CPA | Nov 03, 2014
askacpaiconI am receiving the required minimum distributions from IRAs established many years ago when I was working in a different field. I currently have some earned income from self-employment. Are the IRA distributions taxable by Pennsylvania because I am still working?

Distributions from IRAs are not taxable by the Commonwealth of Pennsylvania. When you contribute to a deductible IRA, 401(k), 403(b), or any other qualified retirement plan, you do not get a state tax deduction for your contribution. Therefore, when you withdraw money from your retirement plan, it is considered to have already been taxed by Pennsylvania, and no tax is due on any distributions in retirement. The fact that you are now working in retirement has no effect on the taxability of IRA distributions. Another benefit to retiring in Pennsylvania is that if you retired after meeting your pension plans eligibility requirements for separation from service by retirement based on age, service, or a combination of age and service, your pension will not be subject to Pennsylvania state income tax.  Reviewed Nov. 2014.

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Answer By: Virgil A. Kahl, CPA, is a financial planner with Spring Ridge Financial Group in Wyomissing. 
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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