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Author: RBrowndog One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121319  
Subject: Retirement,Moving,&State Tax Date: 4/9/1999 7:55 PM
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My apologies if this question sounds dumb or has been asked recently.
I live in a state with state income tax. If when retiring I move to a state with no state income tax. Do I still have to pay the first state income tax on my pension, 401k, and other investments distributions?
If I move to another state with state tax. Will I have to pay income tax to both states?

Ron
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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14214 of 121319
Subject: Re: Retirement,Moving,&State Tax Date: 4/9/1999 8:17 PM
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I believe the answer is No. Don't call me on this, though. A few years ago, California tried to tax the pensions of those who had worked all their lives in California but who had retired to Nevada where there is no state income tax. This was disallowed in a court case.

So, as I understand it, when I retire in Massachusetts and most of my income comes from a job I had in New York, I will pay tax to Massachusetts.

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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14244 of 121319
Subject: Re: Retirement,Moving,&State Tax Date: 4/10/1999 12:25 AM
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RBrowndog writes:

My apologies if this question sounds dumb or has been asked recently. I live in a state with state income tax. If when retiring I move to a state with no state income tax. Do I still have to pay the first state income tax on my pension, 401k, and other investments distributions? If I move to another state with state tax. Will I have to pay income tax to both states?

I reply:

Your question's not dumb; I asked it myself last year. Due to a Supreme Court decision roughly a decade old, your former state is not entitled to tax you on your tax-deferred investments when you move. Nor can your former state tax you in any year when you are not domiciled (which means you've moved away for good) in the state nor earn income there. --Bob

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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14282 of 121319
Subject: Re: Retirement,Moving,&State Tax Date: 4/10/1999 11:45 AM
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The question/issue you are asking is certianly not dumb and the answer is only about 80% clear. The general answer is that you pay state tax on a retirement distribution to the state of which you are a resident. If you are a resident in a state with no state income tax like Nevada or Florida or Illinois (which has a state income tax but excludes retirement distributions from taxation); then you pay no tax. However, there are a least two flies in the ointment:

1. Several states (California comes to mind) have tried to tax out-of-state distributions when the "contributions" were earned within the state during prior years. Usually the state fails on the concept of "nexus"; however, some states have succeeded when the money is coming out of a State pension plan.

2. The concept of nexus is important. If you still have real property or other identifiable assets in the "old" state; they can try (and potentially be successful) at claiming that you have resident status to the old state and therefore taxing your retirement distributions.



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Author: vargaj Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14292 of 121319
Subject: Re: Retirement,Moving,&State Tax Date: 4/10/1999 1:19 PM
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Badger's comment is not coreect regarding his point number 1. Congress nullified CA (and other states) attempts based on the state of contribution.

Joe Varga

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14433 of 121319
Subject: Re: Retirement,Moving,&State Tax Date: 4/12/1999 12:20 AM
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[[My apologies if this question sounds dumb or has been asked recently.
I live in a state with state income tax. If when retiring I move to a state with no
state income tax. Do I still have to pay the first state income tax on my pension,
401k, and other investments distributions? ]]

Nope...not any longer. It used to be that way, but a new federal law a few years ago superseeded all of the states trying to get a tax hook into your pension. Now the rule is that only your state of residence will have a tax claim on your pensions. So if you move to a non-tax state after retirement, you'll not have to deal with your prior state's taxing authority.

TMF Taxes
Roy

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