Moving from state with no income tax to state with tax

[schildi]

I have posted this in the "Your Money" section, and the realized that the tax board may be the better place.

So when one moves mid year (say July 1st) from a state with no income tax to a state with income tax, would it be best to hold off with paying into the 401(k) for the first half year, and then contribute the full amount in the second half of the year, to maximize tax savings? Or does it not matter? The state with income tax in this case would be Oregon, if that makes a difference.

Any other things that should be done in preparation to maximize deductions?

Thanks a lot for any input on this in adv!

[mwcpa]

every state does this different so you need to look at the states rules for allocating wages from the same job when you live in two different states.

New York, by example, wants you to allocate "work" days for the entire salary collected.... so work in NY one day in January when your salary at the job is 10K a year.... but in the middle of the summer the company give you a raise so you make 1 million .... New York will allocate wages to New York based on the 1,000,000 total wage, not the actual pay rate at the time you worked in NY.

I did not look at the Oregon instructions/law, but you should check their website.

[schildi]

Thanks, mwcpa!
I did look, and I did download their brochure for partial year residents, but that in the end really just confused me even more.
www.oregon.gov/dor/PERTAX/docs/part-year-nonresident_101-045_2013.pdf

[mwcpa]

if your employer specifically states the income earned in Oregon that's what you use.... if you think it is wrong then you must provide a calculation, example is noted in the instruction book noted, and obtain a letter from your employer (signed) stating the days....

If you do not work in Oregon, it seems Oregon uses an actual day approach, so, if you moved to Oregon on 7-1 and at that time your paystub noted wages of 10,000 of taxable wages and your W-2 noted 30,000 in box one (taxable wages) then 20,000 would be taxable for your resident portion of Oregon.

If you worked only in Oregon and moved from out of Oregon to in Oregon then 100% of your wages are subject to tax in Oregon, but the state you lived in prior to the move to Oregon, would allow a credit for taxes paid to Oregon during the resident portion of the first state....

This can get hairy... probably more than Turbo Tax can handle and probably more than a 10 week wonder can address as well.  You may be best served finding a local EA or CPA who has dealt with the two state in issue or work with clientele who have knowledge of other state laws (or the tools to get up to speed quickly).  Personally my experience with Oregon mainly deals with those who have non resident income sourced to that state, have not dealt with a split year involving Oregon for a number of years (the last time was about 8 years ago with a self employed writer/artist from NY who moved to the Portland area)

[TheOtherMe]

Iowa's part year resident is complicated and I must confess I messed up my own tax return when I moved here.  It was attempted to do it the very simple way that it's handled in Colorado and that does not work in Iowa.  Iowa figured it out and sent a bill.  

[rangerj]

In the last several years the states have been hurting for money and have been fighting tooth and nail for every dime. Heed the above advice and seek professional help, such as a CPA or Enrolled Agent (EA), with this first year tax return in the new state. The results can be very different for someone on commissions versus someone on salary or hourly wages. Things like vacation time or personal days can also make a difference. 40 hours a week for 52 weeks is 2080 hours and is a simple way to allocate for an hourly employee or salaried employee. The tax on commissions should be allocated to the state where the commission was earned, not where the commission was paid. Just some thoughts.

[schildi]

Thanks all!
Yes, I will seek professional help next year during tax time.
Right now I was just looking for confirmation that deferring my 401(k) contributions to the second half of the year (when living in OR) is the right thing to do.

[Ombud]

Tax 'stores' are really intended for those with simplistic returns where the 'customers' can check the work. I'm sure we all remember the years where they did various thing wrong bc they were just checking boxes and the software wouldn't permit overrides:
♤ tuition credit not entered
♡ POST retiree deduction (3k) omitted by the software
♢ misunderstood HOH
♧ interpreting landlords as real estate 'professionals'
And the list could go on ... So how could they get multi-state or contracts / straddles?