Does my state of residence or account location determine taxation?

Your state of residence determines your state income tax obligation on RMDs — not where your IRA is held. If you live in Florida and your IRA is held at a New York bank, you pay no state income tax on the RMD because Florida has no income tax.

What is the withholding election for state taxes on RMDs?

Your IRA custodian will apply your state's required withholding rate (if any) by default. Most states allow you to waive state withholding. To avoid underpayment penalties, ensure you are either having enough withheld or making quarterly estimated tax payments to your state.

If I move states mid-year, which state taxes my RMD?

If you move states during the year, you may need to file part-year returns in both states. Income earned while a resident of each state is taxable by that state. The exact allocation rules vary. In practice, if you take your full RMD after your move-out date from a high-tax state, you may owe only the new state's lower (or zero) tax.

Guide

RMD State Tax Guide — Which States Tax Required Minimum Distributions?

Does my state tax Required Minimum Distributions?

Federal tax on RMDs is straightforward — they are ordinary income. State tax treatment varies widely. Some states have no income tax at all; others fully exempt retirement income including RMDs; many states tax RMDs just like any other ordinary income.

Understanding your state's rules is essential for RMD planning, especially for retirees considering relocating to a more tax-friendly state.

Key RMD Rules

1Federal: RMDs are fully taxable as ordinary income regardless of state.
2No state income tax states: AK, FL, NV, NH (no earned/retirement income tax), SD, TN, TX, WA, WY.
3States exempting most/all retirement income: IL, IA (after age 55), MS, PA.
4States with partial exemptions: Many states offer a deduction for a portion of retirement income (often $2,000–$50,000+) for qualifying seniors.
5States that fully tax retirement income: CA, MN, NM (partial), VT — tax RMDs as ordinary income.
6State withholding: most custodians apply state withholding based on your state of residence; you can opt out or adjust.

States With No Income Tax (RMDs Untaxed at State Level)

Alaska, Florida, Nevada, New Hampshire (no tax on wages/retirement), South Dakota, Tennessee, Texas, Washington, Wyoming — residents of these states pay no state income tax on RMDs. Florida is especially popular for retirees because it has no income tax and no estate tax. Note: New Hampshire taxes interest and dividends (though this is being phased out), but not retirement distributions.

States That Exempt Retirement Income

Illinois exempts all retirement income from state tax, including RMDs from IRAs and 401(k)s. Mississippi exempts most retirement income including RMDs for residents over 59½. Pennsylvania exempts distributions from employer plans (401k, 403b) and IRAs for retirees. Iowa exempts retirement income for those 55 and older. These states provide significant tax savings on large RMDs.

States That Fully Tax RMDs

California taxes all retirement income including RMDs at rates up to 13.3%. Minnesota taxes RMDs as ordinary income but offers a Social Security subtraction. Vermont taxes retirement income, though offers a modest deduction. If you live in a high-tax state and have large RMDs, relocation to a no-tax state before distributions begin can save tens of thousands over a retirement period.

Common RMD Mistakes to Avoid

⚠Assuming your state exempts retirement income without verifying — state laws change frequently.
⚠Forgetting to update state withholding elections when moving to a new state.
⚠Missing the opportunity to establish domicile in a no-tax state before RMDs begin — planning ahead can save thousands annually.

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Frequently Asked Questions

Disclaimer: This content is for informational purposes only and does not constitute tax or financial advice. RMD rules are based on IRS Publication 590-B and SECURE 2.0 Act provisions. Always consult a qualified tax professional or financial advisor for guidance specific to your situation. IRS rules may change; verify current requirements at irs.gov.

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