State income tax when withdrawing a pension

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Tigermoose
Posts: 556
Joined: Sat Jul 21, 2012 5:02 pm

State income tax when withdrawing a pension

Post by Tigermoose » Mon Nov 28, 2016 7:17 pm

We are planning to move to Texas in 2017. We plan on withdrawing from my wife's pension after we have moved, perhaps in 2018. Would we have to pay state income tax per the location of the employer (Missouri)? Or would we avoid state income tax because of our Texas residence at the time of the withdrawal?
Institutions matter

DetroitRick
Posts: 596
Joined: Wed Mar 23, 2016 9:28 am

Re: State income tax when withdrawing a pension

Post by DetroitRick » Mon Nov 28, 2016 7:29 pm

The location of the employer won't matter, just your state of legal residence when you draw the pension. Federal law (Pension Source Tax Act of 1996) says basically that states can only tax pensions of their own residents.

Here's one reference, and a bit of background:
http://finance.zacks.com/pay-taxes-pens ... -8131.html

You might have the part-year resident issue in the year you move, but that's about it.

Tigermoose
Posts: 556
Joined: Sat Jul 21, 2012 5:02 pm

Re: State income tax when withdrawing a pension

Post by Tigermoose » Mon Nov 28, 2016 8:03 pm

DetroitRick wrote:The location of the employer won't matter, just your state of legal residence when you draw the pension. Federal law (Pension Source Tax Act of 1996) says basically that states can only tax pensions of their own residents.

Here's one reference, and a bit of background:
http://finance.zacks.com/pay-taxes-pens ... -8131.html

You might have the part-year resident issue in the year you move, but that's about it.
Perfect. Thanks!
Institutions matter

bberris
Posts: 1088
Joined: Sun Feb 20, 2011 9:44 am

Re: State income tax when withdrawing a pension

Post by bberris » Tue Nov 29, 2016 9:23 am

Make sure that you sever all ties with the taxing state. There are plenty of threads about a former residence state pursuing people who relocate. States want to continue to tax when they think you are temporarily gone and plan to return (because you still have a house there, for example.)

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