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
Event: Ask the Experts about your refund > RSVP NOW!
Close icon
Do you have a TurboTax Online account?

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

Moving States - How that changes the 401k contribution deduction?

I currently live in Texas, which has 0% state income tax. For work, I need to move to California this summer. I want to max out my 401k to fully capture my employer match.

Since California taxes me at 10% marginal, would waiting to contribute to the 401k until later this year when I'm physically in California save me money on state income tax when I file? Or does it not matter if the contribution was made while I'm in Texas or California?

I'd imagine if it does matter, it could save me 10% on 19.5k which is almost 2k and makes waiting a few months potentially worth it.

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.

3 Replies

Moving States - How that changes the 401k contribution deduction?

@dmertz ??

 

I think it will make a difference, as long as it does not affect your match.  If you get the same match whether you contribute $1625 per month for the whole year, or $3250 for the last 6 months, then it probably will make a difference.  Assuming you can plan ahead and afford to live on less money or save your money earlier in the year.

 

It sounds like you will be working for the same employer, so you will get a single W-2.  Your box 1 wages will be reduced by the amount of your contributions, but that won't be sensitive to where you lived when the contributions were made.  However, your state wages in box 16 should reflect where you were living when you were paid, and that should reflect the reduced wages after the 401k contribution.  

 

Then, when you tell Turbotax you were a part-year TX resident and a part-year CA resident, Turbotax will ask you to manually allocate your wages to the two states.  It may use the reported wages from the W-2 as a starting point, but I think you can alter that if the W-2 is wrong (for example, if the company takes a few pay cycles to update your withholding).  You can allocate the wages in such a way as to show the effect of the 401(k) only on your CA wages, if that's when you made the contributions. 

 

Just in case there is some weird rule that 401(k) contributions must be evenly allocated, I asked an expert to double-check me.  

MinhT1
Expert Alumni

Moving States - How that changes the 401k contribution deduction?

It does matter.

 

If you contribute to your 401(k) while working in California, then your taxable wages sourced in CA will decrease by the amount of the contribution, and you would save on CA 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"

Moving States - How that changes the 401k contribution deduction?

Thank you!

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies