Does your State tax distributions from Traditional IRA to Roth IRA?
It appears some States do not. It would seem to present an opportunity for folks earning income in one State to defer taxes and roll over (IRA) and distributing (Roth IRA) in another. I could contribute 18k to 2015 401(k) in MA and move to employment in PA where I rollover my old 401(k) amount to a traditional IRA, and subsequent distribution to Roth IRA and save on State income tax.
The following is an example from the State of Pennsylvania--i'm not sure if i'm reading it correctly, but if so perhaps i should move there:
"The conversion of a traditional IRA to a Roth IRA is generally not taxable. That is, monies transferred from a traditional IRA to a Roth IRA via conversion (whether by a trustee-to-trustee transfer or a roll-over within 60 days) are generally not subject to Pennsylvania personal income tax. However, any amounts transferred from the traditional IRA that are not put into the Roth IRA, be it by federal income tax withholding or otherwise, are subject to Pennsylvania personal income tax. In such a situation, basis is allocated pro-rata between the taxable distribution and the non-taxable conversion. If there is a partial rollover/conversion, the basis in the traditional IRA must be allocated pro-rata between the traditional IRA and the Roth IRA."
link here
It appears some States do not. It would seem to present an opportunity for folks earning income in one State to defer taxes and roll over (IRA) and distributing (Roth IRA) in another. I could contribute 18k to 2015 401(k) in MA and move to employment in PA where I rollover my old 401(k) amount to a traditional IRA, and subsequent distribution to Roth IRA and save on State income tax.
The following is an example from the State of Pennsylvania--i'm not sure if i'm reading it correctly, but if so perhaps i should move there:
"The conversion of a traditional IRA to a Roth IRA is generally not taxable. That is, monies transferred from a traditional IRA to a Roth IRA via conversion (whether by a trustee-to-trustee transfer or a roll-over within 60 days) are generally not subject to Pennsylvania personal income tax. However, any amounts transferred from the traditional IRA that are not put into the Roth IRA, be it by federal income tax withholding or otherwise, are subject to Pennsylvania personal income tax. In such a situation, basis is allocated pro-rata between the taxable distribution and the non-taxable conversion. If there is a partial rollover/conversion, the basis in the traditional IRA must be allocated pro-rata between the traditional IRA and the Roth IRA."
link here
State Tax on Distributions/Income
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