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Hadn't seen this addressed. Perhaps it has and I didn't use the appropriate search parameters.
Assume one retires mid-year and promptly moves their residence to a different state with a different state income tax responsibility. To where does he/she pay state income taxes? The state where most of the income was earned, but in which they no longer live? Or, in the new state of residence?
Hadn't seen this addressed. Perhaps it has and I didn't use the appropriate search parameters.
Assume one retires mid-year and promptly moves their residence to a different state with a different state income tax responsibility. To where does he/she pay state income taxes? The state where most of the income was earned, but in which they no longer live? Or, in the new state of residence?
Although your question is formed around retirement you might get a better response from the Realestate forum but take this advice; free advice might not be good advice. You probably should talk to professionals for a fee.
You pay your share of the appropriate taxes to BOTH states. You File as a Part Year Resident in both states. But each states rules are different on how you do it.
But.......how long does it take to establish residency in the new state? Then does then tax burden start from when you first moved retro or when residency is established?
The 1st day you move into state you start paying taxes in that state as part year resident.
Key Word here is MOVE you may need to show (very unlikely) your old state that you have set up residence in the new state. Bought a new place to live, Renting a new place to live. Physically working in the new state, enrolling kids in school there, that kind of thing....
Living a in hotel few days a week for months on end would be a big RED Flag to your old State.
Hadn't seen this addressed. Perhaps it has and I didn't use the appropriate search parameters.
Assume one retires mid-year and promptly moves their residence to a different state with a different state income tax responsibility. To where does he/she pay state income taxes? The state where most of the income was earned, but in which they no longer live? Or, in the new state of residence?
I have encountered this about ten times in my career and we moved quite frequently.
The first thing that you must do is to determine the date that you move. If you are retiring and moving, that is generally the date you arrive in the new location. I would suggest that you 1) purchase or rent a house, 2) apply for your new car registration, title, and license, and 3) register to vote in the new location.
All these actions help o establish you as a resident of the new state.
2) At the end of the year, gather up all your tax documents. Using the date above, allocate your income, expenses, and the like between the states.
3) Then you have to determine which tax forms to complete. Most states have a part-year resident returns which will help you determine which state gets the income and the deductions.
In general, income is allocated to the state in which it is earned.
Even though I am a retired CPA, I generally hire a professional in move years for two reasons. First, the returns are really more complicated. Also, I can ask a lot of questions that will help me prepare the returns in the future.
But.......how long does it take to establish residency in the new state? Then does then tax burden start from when you first moved retro or when residency is established?
What I like to do is to head over to the appropriate state's department of revenue and look for what you need to do to establish residency. There is generally a list of events that establish you as a resident.
IMO, someone taking a two month trip to Arizona from Illinois probably does NOT establish residency UNLESS you are accepting a job and starting work.
However, the more you establish yourself in the new state, the more likely you will be considered a state resident.
Having said that, I think that your larger risk is from the state you are LEAVING as opposed to the NEW state as most people move from a highly taxed state to a lower tax state. If you are making a permanent move, I suggest that you get your assets out of the old state so that there is no confusion as to what state you are a resident of. States like New York and Illinois where there is significant EMIGRATION, are actively pursuing former and temporary residents to cover their budget deficits.
When I prepare my returns, I always prepare them with the thought that they will be audited by the IRS and the state tax authorities.
You just file 2 state income taxes for the two states you lived in, use the dates on when you started living in the second one.. I did that for CA and VA and it was easy.. most the time you will get some money back from your original state if you were still working before you moved.
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