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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 318
Experience:  Tax Accountant at Praxair, Inc.
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I am 61 years old and currently recieve a monthly police

Customer Question

I am 61 years old and currently recieve a monthly police disability pension from the California Public Employees Retirement System (CALPERS) which is not taxed.
I am also ready to retire from the County of Alameda in California and will recieve my monthly pension from the Alameda County Employees Retirement Association (ACERA) as well.
I am considering moving to Pennsylvania full-time.
I see that the State of Pennsylvania does not tax pensions.
My Question:
Will California continue to tax my retirement incomes if I move to Pennsylvania?
Submitted: 1 year ago.
Category: Tax
Expert:  Jonathan Tierney replied 1 year ago.

Hi, my is Jonathan and I hope to provide you with the most complete and accurate answer. Though short answer to your question is no.

States have the right to tax income earned within their state. As pension income is compensation for services rendered within their state, many states, including California, have sought to tax pension income tax is derived from employment within their state. However, Congress passed P.L 104-95 which mandates that all pension income cannot be sourced to any particular state. Only the pension recipient's state of residence is able to tax the pension, which is up to each individual state.

However, this does not mean a state like California will not try to find a way around the law. The California legislature has considered proposals to impose an "excise tax" on employer contributions to pensions when the pension is eventually paid out to the retiree, if they move out of state. It is unclear if such a law would be upheld by the courts though. You can read more about this here: http://finance.zacks.com/california-pension-income-taxable-outside-california-8191.html

If you do move, you will need to inform the pension systems that you have left the state so stop withholding California income tax.

I hope that answers your question. Please let me know if you need any additional information. Jonathan