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Is deferred compensation considered "source income" in Virginia if I receive it as a Florida resident?

Forum|Forum|7 years ago
June 6, 2019
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Several years ago I lived and worked in Virginia. Part of my compensation was deferred, to be paid sometime after I retired. I am now retired and living in Florida. I recently received the deferred compensation, from which Federal and Virginia taxes were withheld. My question: Is the deferred comp considered Virginia "source income" that must be declared on a Virginia Non-Resident tax return (Form 763)? OR, is it not considered Virginia source income, because I received the income as a Florida resident and earned no wages in Virginia the year received?

Best answer by SweetieJean

"Generally, deferred compensation is taxable in the state where the employee worked and earned the compensation, regardless of whether the employee moves after retirement."

"However, if the employee has elected to take the deferred compensation payments over a period of 10 years or more, the deferred compensation payments are taxed in the state of residence when the payments are made." This can make a big difference if you move to a state that has no state income tax, such as Florida, Washington or Nevada, or at least to one with a lower income tax than where you earned the money.

https://turbotax.intuit.com/tax-tips/tax-payments/strategies-for-managing-your-tax-bill-on-deferred-...

S

SweetieJeanAnswer

Employee

"Generally, deferred compensation is taxable in the state where the employee worked and earned the compensation, regardless of whether the employee moves after retirement."

"However, if the employee has elected to take the deferred compensation payments over a period of 10 years or more, the deferred compensation payments are taxed in the state of residence when the payments are made." This can make a big difference if you move to a state that has no state income tax, such as Florida, Washington or Nevada, or at least to one with a lower income tax than where you earned the money.

https://turbotax.intuit.com/tax-tips/tax-payments/strategies-for-managing-your-tax-bill-on-deferred-...

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JohnBklyn

I am in a similar situation. I am taking my payments over a 10 year period. Should I file a return in the state that my taxes were withheld to claim a refund?

DMarkM1

Yes, file a nonresident return to claim the refund of taxes withheld from your deferred compensation. Additionally, work with the payor to change the state to your residence state to stop the withholding by the nonresident state.

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