Changing State Tax Question on 401K

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dvcdenise
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Joined: Sat Aug 27, 2016 4:01 pm

Changing State Tax Question on 401K

Post by dvcdenise »

If I live in a state with a state tax and move to another state with no state tax, after living in state #2 I take out money from a 401K. How is the withdrawal taxed . Would it be state sate tax free if I lived in a tax free state when it was withdrawn? I know Federal would get their bite regardless. Is an IRA treated the same as a 401K in this instance?
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grabiner
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Re: Changing State Tax Question on 401K

Post by grabiner »

IRA and 401(k) withdrawals are taxed by your state of residence when the money is withdrawn, under its tax laws.

This makes traditional (rather than Roth) 401(k) contributions particularly attractive if you might retire in a tax-free state; you deduct the contribution and pay no state tax on the withdrawal. Conversely, if you are working in a tax-free state and might retire in a high-tax state, Roth accounts have an advantage.
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Topic Author
dvcdenise
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Re: Changing State Tax Question on 401K

Post by dvcdenise »

Thank that sounds great. I should defiantly wait until a am a resident of Florida to withdraw than when I am living in NY .
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Duckie
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Re: Changing State Tax Question on 401K

Post by Duckie »

dvcdenise wrote:I should defiantly wait until a am a resident of Florida to withdraw than when I am living in NY .
New York state has an annual $20,000 tax exemption for retirement income (corporate pension, IRA, 401k, etc.) if you're age 59.5 or older. Government pensions (federal, NY state, NY local) are 100% NY state tax-exempt.
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sometimesinvestor
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Re: Changing State Tax Question on 401K

Post by sometimesinvestor »

Duckie's info is correct but if you area govt employee in NYS near retirement you probably know this.
Topic Author
dvcdenise
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Re: Changing State Tax Question on 401K

Post by dvcdenise »

Thanks Duckie I totally forgot about that.
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