Roth Conversions State Taxes Partial Year Resident - I Outdumbed Myself

[Midpack]

We lived in another state our first six months this year, and in NC the balance of this year. I am planning on a sizable Roth conversion before year end, and it just occurred to me that I'll be paying NC income taxes on the full amount, where I could have paid significantly less had I done the conversion any time before we moved.

Too soon old, too late smart...

 

[Senator]

Can you just allocate a percentage based on the month you became a resident? Take 4/12 for one state and 8/12 for another?

Or does the exact date matter? I changed residency this year, and my accountant said use a prorated amount for each state.

 

[pb4uski]

Not sure how much you did in Roth conversions but I think the state tax rate difference is only 0.3%, $300 on $100k... so don't beat yourself up too much...

 

[steelyman]

It’s not a big deal. I did it when moving from the mysterious state of Illinois. Taxes were higher in North Carolina then.

Going forward, you lose the free ride from state tax on all retirement income like pensions, 401(k), 403(b), IRA.

 

[Ed_The_Gypsy]

It could be worse.


An accountant at one company I worked told me there was a category "part-time deceased".

 

[Sunset]

IL state tax is 0% on retirement income, including IRA to Roth Conversions, or simply IRA withdrawals.

It's the one good thing about IL taxes left.

Still with that, IL is the #1 State that is most tax unfriendly.
OP - be glad you got out.
https://www.kiplinger.com/slideshow...ax-friendly-states-in-the-u-s-2019/index.html

 

[Midpack]

Can you just allocate a percentage based on the month you became a resident? Take 4/12 for one state and 8/12 for another?

Or does the exact date matter? I changed residency this year, and my accountant said use a prorated amount for each state.

I looked at the partial year resident instructions, and both specifically ask the taxpayer to show the income, dividends, etc. they received while (physically) in the state. Since I haven't done the conversion yet, and moved here in July, I wouldn't attempt to slide that by. And I didn't pay estimated taxes in the old state, would be suspect if I sent a big estimated tax check in 5-6 months later?

Not sure how much you did in Roth conversions but I think the state tax rate difference is only 0.3%, $300 on $100k... so don't beat yourself up too much...

Actually the difference is 2.02% so it would be $2,020 on $100K.

 

[pb4uski]

.... Actually the difference is 2.02% so it would be $2,020 on $100K.

OMG! What were you thinking?

 

[SecondCor521]

Having been bit before by similar sorts of tax surprises, I have tried to train myself to think strategically and continuously about taxes. With the complexity we all face, it can be pretty difficult. After three years in FIRE, I'm still discovering little tweaks that I can do to improve.

When I make mistakes, I try to learn from them and then let them go. Easier said than done with my personality.