State Tax on Retirement Income: What Changes When You Move
How states treat IRA withdrawals, pensions, Social Security and Roth conversions — exemptions, credits, residency rules and the real cost of relocating.
Four categories of state
- No income tax at all. Nine states levy no broad personal income tax, so IRA withdrawals and conversions are untaxed at the state level.
- Tax income, exempt retirement income. Several states exempt all or most pension and IRA distributions, sometimes only above a certain age.
- Partial exclusions. The most common design: a fixed dollar exclusion of retirement income per person, often age-gated and sometimes phased out by income.
- Full taxation. Distributions and conversions are taxed as ordinary income, at rates ranging from flat low-single-digit to double digits.
Social Security is treated separately
Most states exempt Social Security benefits entirely; a minority tax some portion, usually with generous income thresholds. Because federal taxation of benefits already depends on other income, a state that piggybacks on federal adjusted gross income can quietly import that effect.
Conversions are usually not sheltered
A state may exclude "retirement income" while still taxing a Roth conversion in full, because the exclusion is often written for periodic distributions after a given age. This is the single most expensive detail people miss: a conversion plan sized correctly for federal purposes can carry an unexpected state bill.
Residency, and the year you move
- Federal law bars states from taxing the retirement income of former residents, so a pension earned in a high-tax state is taxed where you live, not where you worked.
- In the year of a move you generally file part-year returns in both states; timing a conversion for after the move date can matter more than the whole year's planning.
- High-tax states audit residency claims. Days present, driver's licence, voter registration, physicians and where your family lives all matter.
Do not let the tax tail wag the dog
Property tax, sales tax, estate or inheritance tax, insurance costs and healthcare access often outweigh the income tax difference. Compare total lifetime cost, not the headline rate — and check whether an estate or inheritance tax exists, since only a minority of states impose one.
Educational modeling only. Bracketwise is not tax, legal or investment advice.