turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cindy9
New Member

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

If only taxable in Colorado, how is it treated on Non-Resident CA (540NR) form.

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Best answer

Accepted Solutions

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

Retirement income is only taxed in your state of residence.  If you file a California nonresident return, the tax is determined using all of your income but you only pay on the California income. The percentage of CA income is applied to the determined tax.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

6 Replies

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

Retirement income is only taxed in your state of residence.  If you file a California nonresident return, the tax is determined using all of your income but you only pay on the California income. The percentage of CA income is applied to the determined tax.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
theresa_z
New Member

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

How do I remove the Colorado retirement income to calculate the California income to determine the California tax?

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

Unfortunately, California uses all the income on your federal tax return (with adjustments) to determine the tax rate.  They then apply the tax rate to the California income (using a percentage of CA income).
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
bkinouye
New Member

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

I had a similar question, and found this in State of California Franchise Tax Board publication FTB-1031, "2018 Guidelines for Determining Resident Status".  On page 8, under IRA distributions, it states:

 

"IRA, Roth IRA, SIMPLE IRA, SEP, and Keogh distributions received after becoming a nonresident are not taxable by California if received after December 31, 1995."

 

To me, it's clear that once you become a nonresident, or you've always been a nonresident, the distributions you receive are not taxable by California.

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

Correct...they are not directly taxable HOWEVER like many other states, CA used your total annual income to compute your taxes and then prorate them...this cannot be changed. Review the return line by line to see how it plays out. 

Is IRA distribution taxable in California, my non-resident state or only in Colorado, my resident state?

This method that California uses to determine the tax in this manner seems to run afoul of US Code Title 4, Chapter 4, Section 114(a).  If the income from the IRA distribution was not involved in the calculation at all, the California tax is much lower than when the IRA distribution is used to calculate the tax, then removed by prorating the amount.  This results in a net effective tax on the IRA distribution.  (In my specific case, my California total tax was more than $1800 using the tax form as instructed, and was less than $700 if the IRA distribution was removed from my California taxes completely, so the effective net tax on my IRA distribution was over $1100).  According to US Code Title 4, Chapter 4, Section 114(a), my net tax on this distribution should be $0, so California is using some shady (and probably illegal) accounting practices to get around this law.

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies