IRA to ROTH conversion and moved Michigan to Virginia

[emerlingl]

Greetings,

I retired earlier in 2019 and moved from Michigan to Virginia.  All severance pay was collected during our 7 months (Jan-Jul) as a Michigan resident.  In December, while a resident of Virginia, I processed a conversion from my IRA to my ROTH.

To make math easy, lets say severance was $30,000 and IRA to ROTH IRA was $70,000.  For state tax purposes, what is the split of the $100,000 between the two states?

Thanks for your assistance,

Larry

[TomD8]

If you earned the severance pay in Michigan and received it as a Michigan resident, it is taxable by Michigan.

If the Roth conversion took place after you became a Virginia resident, it is taxable by Virginia.

[RBBrittain · Accepted solution]

The $30,000 in severance is taxable by MI as you both lived and worked there. Assuming none of it was received after you moved to VA, none of it is taxable by VA.

Income from IRAs and retirement plans is taxable only by your resident state. Thus, your $70,000 IRA-to-Roth conversion while living in VA is taxed only by VA, not MI. (As far as I can tell from VA tax instructions, VA has no special treatment for this type of income. If special treatment is available, TurboTax VA should catch it.)

Note that you will file "part-year resident" returns with both MI & VA.

[emerlingl]

Thank you for your reply. 

Does Virginia have a safe harbor?  Last year I obviously paid $0 to Virginia and so far have paid $0 tax to Virginia since moving.

I am at safe harbor for both Federal and Michigan, do you have advise on safe harbor for Virginia?

Take care, Larry