How do I determine if my out-of-state pension is taxable by California?

Your out-of-state pension is taxable by California if you are a California resident when you receive the payments. The state where you earned the pension does not determine its taxability in California. Here is how to determine if your pension is taxable: Step 1: Determine Your California Residency Status First, you must establish your residency status for tax purposes for the year in question. Under California law, you are a resident if you are in the state for any reason other than a temporary or transitory purpose. The Franchise Tax Board (FTB) will consider where your primary home is, where your driver's license is issued, where you are registered to vote, and where your closest personal and financial connections are. Step 2: Collect Your Pension Income Documents Gather all relevant pension documents, specifically your federal Form 1099-R for the tax year. This form shows the total amount of pension income you received. Note the dates you received the payments, as this is important if you moved during the year. Step 3: Apply the Residency Rule to Your Pension Compare your residency status with the dates you received pension payments. If you were a full-year California resident, all pension payments you received that year are taxable by California, regardless of their source. If you were a part-year resident, only the pension payments you received while living in California are taxable. Step 4: Report the Taxable Income on Your California Return Report the taxable portion of your pension on your California tax return. You will use Form 540 if you are a full-year resident or Form 540NR for a part-year resident. These forms and instructions are available on the FTB website. The filing deadline is typically April 15. Important details and nuances: Federal law (4 U.S.C. § 114) prevents the state where you earned your pension from taxing you after you move away. However, this same law explicitly permits your new state of residence—California—to tax that income. California taxes all income of its residents, no matter the source. Warnings and limitations: Residency is the most critical factor and can be a complex legal determination, especially if you maintain connections to another state. The FTB frequently audits residency status. Incorrectly reporting income can result in significant penalties and interest. This is general information and does not constitute legal advice. For complex situations, particularly those involving part-year residency or significant assets in multiple states, consult with a qualified California tax attorney or CPA.