A federal law settled the largest question about retiring across a state line thirty years ago, and most people have never heard of it. For amounts received after 1995, no state may tax the retirement income of someone who is not a resident or domiciliary of that state. A person who spent a working life in California and retires to Nevada owes California nothing on the pension or the 401(k) withdrawals, whatever state the money was earned in.
That law covers a specific list: qualified plans, individual retirement accounts, 403(b) contracts, governmental plans and military retired pay. It does not cover severance, equity awards, unused vacation or sick pay, or nonqualified deferred compensation unless paid in substantially equal payments over life expectancy or at least ten years. Deferred compensation stretched across five years falls outside the shield, and the old state can tax it.
What the Map Actually Looks Like
The headline geography is simpler than the advertising suggests. Eight states levy no individual income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. New Hampshire completed the picture when its tax on interest and dividends ended in 2025. Washington taxes no wages but does tax capital gains, which is why careful lists put it in a category of its own.
Social Security is disappearing from state tax bases. Eight states still tax it in some form: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont. Kansas, Missouri and Nebraska stopped in 2024, and West Virginia's phase-out finishes with this tax year. Most of the eight exempt it below an income threshold anyway, so the label overstates the burden.
Pension and account income is where the real variation sits. Illinois subtracts the taxable portion of Social Security, qualified plans, IRAs and government pensions. Mississippi and Pennsylvania exempt retirement distributions taken at the proper age and tax early ones. Michigan finishes a four-year phase-out this year that removes its age restrictions entirely. Georgia excludes 65,000 dollars per person at 65 and over, New Jersey up to 100,000 for a couple before a phase-out ending above 150,000 of total income, and New York 20,000 per spouse.
The Mechanics of a Domicile That Has to Be Proved
Moving is where the arithmetic turns into a records problem. A state can tax you as a resident two ways. The first is domicile, the place you intend as your permanent home, of which there is only one. The second is statutory residency: in New York, maintaining a permanent place of abode for more than ten months of the year and spending 184 days or more in the state. Any part of a day counts, which means a two-hour connection at an airport can count.
The burden is on the person claiming to have left. New York's audit guidelines require the party asserting a change of domicile to prove it by clear and convincing evidence, and practitioners describe the effect as a tie going to the tax department. The guidelines also warn auditors that formal declarations like voter registration and a driver's license are less persuasive than the informal evidence of a person's general habit of life.
That evidence is now largely electronic. Auditors ask for cell phone records showing tower locations, which practitioners call the single most important source of day-count documentation, along with toll transponder records, credit card and ATM statements, building entry logs and travel documents. The department need not account for every day individually; it establishes patterns and infers the rest.
The Five Things Auditors Weigh
The domicile test has been stable for decades. Auditors compare homes in each location by size, value and use; the degree of active involvement in businesses in each state; time spent in each; the location of items near and dear, meaning the art, the heirlooms and the photographs; and family connections, chiefly a spouse and minor children and where they attend school.
California runs a different test with the same effect, and no day-count line at all. Residency is a question of fact determined by all the circumstances, the theory being that you are a resident where you have the closest connections, and the state's own publication stresses that it is the strength of the ties rather than the number.
What Follows the Money
The federal law protects the pension from the state you left, and protects nothing about the question of whether you actually left. Three things settle most of it, all documentary. Establish the new domicile with habit-of-life evidence rather than paperwork alone, since the guidelines say plainly which carries weight. Keep a contemporaneous day log for the first two years, because reconstructing one after an audit notice arrives is considerably worse. And check the estate tax separately from the income tax: twelve states and the District of Columbia have one, five have an inheritance tax, Oregon's estate exemption is one million dollars and Pennsylvania's inheritance tax has no exemption at all.
— John Stone