Roth Conversion Income Subject to State Tax

Q.: I'm a member of the Teachers' Retirement System of the City of New York. I will be taking a maximum Final Distribution from my annuity savings account when I retire next year. The funds will be taxable because, rather than deferring the tax by rolling the money into to a traditional IRA, I plan to convert (rollover) the distribution into a NYCE Roth IRA. I know I must pay Federal income tax on the entire amount. How will the State of New York treat this transaction? H.G.

A.: Roth conversion income is taxable as "Pension and Annuity Income" by the State of New York. You will be taxed based on the pension and annuity income exclusion of $20,000. Example: $35,000 is converted to a NYCE Roth IRA less the $20,000 exclusion = a taxable amount of $15,000. Note: If the Roth conversion is less than $20,000 the entire conversion will not be taxed by the State of New York.