I receive a pension from the state of Illinois. If I move to Wisconsin, will I pay tax on that pension?

[SteamTrain · Accepted solution]

Yes, you will.

Pensions are taxable according to the laws of the state you live in.  Wisconsin only exempts pension $$s from certain WI-Govt pensions,  Military, and  some US Govt pensions.   

If you do decide to move to WI, it's worth reading all of this WI Pub for retirees, but this particular question is answered at section 3.B.  (the top of page 4):

https://www.revenue.wi.gov/DOR%20Publications/pb106.pdf

[BobinCT]

And, of course, Federal income tax applies equally.

[electra2014]

Thank you.

[RHercmanas]

I have read section 3B but still not fully understanding the tax on an Illinois pension and living in Wisconsin. I plan on moving to Wisconsin soon, while working in Illinois. I plan to retire in 25 years and when I do retire I will have to pay tax on my pension when I retire? Also if I have property in another state can I claim that my primary residence to avoid the pension tax?

[DMarkM1]

You will be taxed based on your state of residence.  If you live in WI you will be taxed on pension amounts received while a resident of WI.  

IL does not tax the retirement benefits listed below.  If you are an IL resident for any part of the tax year you are allowed a subtraction on your IL state resident return for the amounts received while you were an IL resident.  

No, owning a property by itself in a state typically does not show that a taxpayer has abandoned residency in another state. The preponderance of actions such as physically moving and establishing ties to the new state determine if a residency has been abandoned.  Each state has it laws on the subject.  Here is a link to the WI definitions of tax residency.      

IL allows a subtraction for:

• a qualified employee benefit plan including 401(k) plans reported on your U.S. 1040 or 1040-SR, Line 5b. A qualified employee benefit plan is defined in IRC Sections 402 through 408. If you do not know whether your employee benefit plan is qualified, check with your employer. 
• railroad retirement income reported on your U.S. 1040 or 1040-SR, Lines 5b and 6b. 
• an Individual Retirement Account (IRA) (including amounts rolled over to a Roth IRA) or a self-employed retirement (SEP) plan reported on your U.S. 1040 or 1040-SR, Line 4b. 
• Social Security benefits reported on your U.S. 1040 or 1040-SR, Line 6b. Do not include Social Security withheld from wages shown on your Form W-2, Wage and Tax Statement. a government retirement and government disability plan, including military plans, reported as wages on your U.S. 1040 or 1040-SR, Line 1. 
• a state or local governmental deferred compensation plan paid under Internal Revenue Code (IRC) Section 457 and reported on your U.S. 1040 or 1040-SR, Line 1 or 5b. 
• capital gains on employer securities received in a lump-sum distribution, to the extent the gains are due to net unrealized appreciation on the securities at the time of distribution and reported on your U.S. 1040 or 1040-SR, Line 7. 
• retirement payments to retired partners reported on your U.S. 1040 or 1040-SR, Schedule 1, Line 5. 
• group term life insurance premiums paid by a qualified retirement plan or government retirement plan and included as wages on your U.S. 1040 or 1040-SR, Line 1. 
• interest income realized on the redemption of U.S. retirement bonds reported on your U.S. 1040 or 1040-SR, Line 2b. You may include early distributions from qualified plans and IRAs.