If I live in Washington and work in Oregon am I better off contributing to my Traditional IRA instead of Roth?
Does Oregon tax the income I contribute to my traditional IRA? Will Oregon be able to tax IRA distributions once I retire and live in Washington? I have always worked in Washington until recently so it always made sense to contribute to my Roth, but now that I am paying Oregon income tax, I wonder if it might be smart to contribute to the traditional if that state defers taxes on traditional contributions and will not be able to tax distributions once I quit working there.
United States - 2 Answers
People's Answers, Critics, Comments, Opinions :
Answer 1 :
Does Oregon tax the income I contribute to my traditional IRA? If all of your income is from your job in Oregon, you will get the full deduction for your traditional IRA. If you have income from outside of Oregon, you get a pro-rated deduction. Will Oregon be able to tax IRA distributions once I retire and live in Washington? No. Once you are no longer a wage earner in OR, you will not owe OR income tax on your retirement income. I assume you have no business income in OR. If you have a traditional deductible IRA, both your federal and OR income taxes will be reduced in the year of contribution. If you have a Roth IRA, you will pay federal and OR income taxes in the year of contribution. If the OR tax on your Roth IRA is significant to you, you can change over (in full or part) to a traditional IRA to reduce OR taxes in the year of contribution. I don't understand your logic in that from a WA resident perspective, a Roth IRA is better for you. You will pay no state income tax on your distributions from either a traditional IRA or a Roth IRA. Since you have no state income tax, your decision should be based on your federal income taxes, plus RMD requirements for a traditional IRA.
Answer 2 :
the point is, your tax home is where you work and if this is not a temporary, short term job in Oregon, you will file Oregon tax returns if you contribute to a reg IRA the amount causes a reduction in your taxable income, no matter where you file because most states take the figures from your 1040 to enter on the state and the IRA contribution is already figured in a Roth is not a tax advantage when you contribute or when you take distribution in any state
Does Oregon tax the income I contribute to my traditional IRA? Will Oregon be able to tax IRA distributions once I retire and live in Washington? I have always worked in Washington until recently so it always made sense to contribute to my Roth, but now that I am paying Oregon income tax, I wonder if it might be smart to contribute to the traditional if that state defers taxes on traditional contributions and will not be able to tax distributions once I quit working there.
United States - 2 Answers
People's Answers, Critics, Comments, Opinions :
Answer 1 :
Does Oregon tax the income I contribute to my traditional IRA? If all of your income is from your job in Oregon, you will get the full deduction for your traditional IRA. If you have income from outside of Oregon, you get a pro-rated deduction. Will Oregon be able to tax IRA distributions once I retire and live in Washington? No. Once you are no longer a wage earner in OR, you will not owe OR income tax on your retirement income. I assume you have no business income in OR. If you have a traditional deductible IRA, both your federal and OR income taxes will be reduced in the year of contribution. If you have a Roth IRA, you will pay federal and OR income taxes in the year of contribution. If the OR tax on your Roth IRA is significant to you, you can change over (in full or part) to a traditional IRA to reduce OR taxes in the year of contribution. I don't understand your logic in that from a WA resident perspective, a Roth IRA is better for you. You will pay no state income tax on your distributions from either a traditional IRA or a Roth IRA. Since you have no state income tax, your decision should be based on your federal income taxes, plus RMD requirements for a traditional IRA.
Answer 2 :
the point is, your tax home is where you work and if this is not a temporary, short term job in Oregon, you will file Oregon tax returns if you contribute to a reg IRA the amount causes a reduction in your taxable income, no matter where you file because most states take the figures from your 1040 to enter on the state and the IRA contribution is already figured in a Roth is not a tax advantage when you contribute or when you take distribution in any state
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