Hello. I began receiving pension benefits from the Arizona State Retirement System (ASRS) in Sep 2020. That same month, I moved from Arizona and became a resident of South Dakota. I did file a partial-year return for AZ in 2020 and paid taxes on my pension income for tax year 2020.
My question is tax year 2021 and beyond. As a full-time resident of South Dakota now, it's my understanding that my ASRS pension income is not taxable in Arizona because I'm no longer a resident. This is backed up by the following statement posted on the ASRS website here which reads (in part):
"In 1989, the Arizona Legislature passed a bill which mandates the taxation of retirees’ pensions for the year of 1989 and thereafter. Retirees living in Arizona are required to pay Arizona state income taxes on any taxable distribution from the ASRS over $2,500 per year. Retirees living in other states are not required to pay Arizona state tax and the ASRS cannot withhold for any other state’s income tax liability."
However, when I call the AZ Department of Revenue, they state that 100% of my ASRS pension income is taxable (minus any standard deduction) and tell me to reference their Form 140NR which states:
"To see if you have to file, figure your gross income the same as you would figure your gross income for federal income tax purposes. Then you should exclude income that Arizona law does not tax. Income that Arizona law does not tax includes:
- interest from U.S. Government obligations;
- social security retirement benefits received under Title II of the Social Security Act;
- benefits received under the Railroad Retirement Act, tier 1 or tier 2 railroad retirement benefits, railroad disability benefits reported on federal forms RRB-1099 and RRB1099-R, railroad unemployment benefits and railroad sickness payments paid by the Railroad Retirement Board;
- pay received for active service as a member of the Reserves, National Guard, or the U.S. Armed Forces;
- or benefits, annuities and pensions as retired or retainer pay of the uniformed services of the United States."
As you can see, the info provided in the AZ Form 140NR does not specifically list state retirement pensions as excluded from nonresident taxation.
Can someone please provide some clarification on how my ASRS pension benefits are to be taxed and by whom?
Thank you in advance for your time and input! 👍
