Will a new Utah resident owe Utah income tax on retirement income (pensions, deferred compensation, Social Security) already taxed by California, and what are Utah's general sales and property tax rates?

Plain-English summary

A prospective retiree planning to move to Logan, Utah wrote a short, handwritten letter to the Utah State Tax Commission asking a practical question: their retirement income would be a mix of California state pensions, deferred compensation plan savings, and Social Security, and California requires them to keep paying California income tax on that income even after moving out of state. Would Utah also tax that same retirement income once they became a Utah resident? They also asked generally about Utah sales and property taxes.

The Commission answered the core question directly, in slightly different wording across three response letters (dated June 21, July 5, and July 6, 1995 -- the later two restate and then expand on the first). A Utah resident must report all income on their Utah return, regardless of which state it was earned in or is also taxed by. But Utah gives a credit, under Utah Code Ann. § 59-10-106(1), for income tax the resident actually paid to another state on that same income. The credit is the smaller of (1) the actual tax paid to the other state, or (2) a proportional share of the Utah tax -- calculated by dividing the amount of federal adjusted gross income taxed by the other state into total federal adjusted gross income, and applying that fraction to the Utah tax. The bottom-line effect the Commission described: a Utah resident won't end up paying Utah tax on income that's already taxed by another state at a rate equal to or higher than Utah's own rate. So the retiree's California-taxed pension and deferred-compensation income would be reportable on the Utah return, but largely or fully offset by the credit for California tax already paid.

The final, most complete response (July 6, 1995) also answered the retiree's general questions about other Utah taxes: the 1995 statewide sales tax rate was 5.875%, though most communities added local tax on top, bringing the rate in most Wasatch Front communities to about 6.125%. On property tax, the Commission explained that all real and personal property is taxed unless specifically exempt, that a primary residence's household furnishings are exempt on 55% of their assessed value, that other property is assessed at 100% of value, that motor vehicles are taxed at a flat 1.7% of value, and that other property is taxed at a local rate that varies by community -- estimating (with the caveat that Logan's rate for that year hadn't yet been set) roughly 1.185% for the Logan area.

What this means for you

People relocating to Utah with retirement income from another state

The core lesson holds well beyond this specific taxpayer: moving to Utah doesn't let you keep an out-of-state pension or deferred-compensation income off your Utah return, but it also generally doesn't mean you pay full tax twice. Utah's credit for tax paid to another state is designed so that income already taxed elsewhere at a Utah-equal-or-higher rate doesn't generate additional Utah tax. If the other state's rate is lower than Utah's, expect to owe the difference to Utah.

Anyone comparing overall tax burden before relocating to Utah

The sales and property tax figures in this ruling are helpful as a historical snapshot of how the Commission explains Utah's tax structure to a newcomer, but they are 1995-specific numbers (a 5.875% base sales tax rate, ~6.125% in many Wasatch Front cities, 1.7% motor vehicle rate, ~1.185% estimated local property rate for Logan) that have almost certainly changed since. Treat this ruling as a template for the kinds of taxes and mechanics to ask about, not as current rate information.

Accountants and tax professionals advising new Utah residents

The credit mechanic described -- smaller of (a) actual tax paid to the other state, or (b) a proportional share of Utah tax based on the share of federal AGI taxed elsewhere -- is a useful plain-language explanation of how Utah Code Ann. § 59-10-106(1)'s resident credit worked in 1995. Confirm the current statute (renumbering/amendments are common over three decades) before applying this mechanic to a present-day return.

Common questions

Q: Does a new Utah resident have to report retirement income earned in another state?
A: Yes -- Utah residents must report all income on their Utah return regardless of where it was earned, including out-of-state pensions, deferred compensation, and similar retirement income.

Q: Will that income be taxed twice, once by the other state and once by Utah?
A: Not fully. Utah Code Ann. § 59-10-106(1) gives a credit for income tax actually paid to another state on that same income, calculated as the smaller of the actual tax paid or a proportional share of the Utah tax. If the other state's rate is equal to or higher than Utah's, the credit generally eliminates any additional Utah tax on that income.

Q: What were Utah's sales and property tax rates according to this ruling?
A: As of 1995: a 5.875% statewide sales tax rate (about 6.125% in most Wasatch Front communities with local add-ons), property assessed at 100% of value (household furnishings on a primary residence exempt on 55% of value), motor vehicles taxed at 1.7% of value, and other property taxed at a varying local rate (roughly 1.185% estimated for the Logan area that year). These are historical 1995 figures, not current rates.

Q: Does this ruling apply to my own retirement-income situation?
A: Not automatically. It's a private letter ruling binding only on the Commission for the taxpayer and facts described, and its rate information is decades out of date. Consult a Utah tax professional and check current rates and statute numbering.

Citations and references

Statutes (1995-era numbering and rates -- since amended; sales and property tax rates change frequently and should be verified independently):

• Utah Code Ann. § 59-10-106(1) (1995) (resident credit for income tax paid to another state)
• Sales tax rate and property tax assessment/rate figures cited are general 1995 information provided by the Commission, not tied to a specific statute in the ruling text itself.

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/95-023.htm

Original ruling text

Responses
June 21, 1995, July 5, 1995 and July 6, 1995

Request

hand-written

**We are planning to retire in Logan and would like info on taxes in
Utah, including income, sales and property taxes. Our retirement income will be a combination of St. of CA.
pensions, deferred compensation plan savings and social security. The State of Calif. requires us to pay
Calif. Income taxes on this even if we live in another state. Will we also be required to pay income tax
in Utah on this retirement income? Any
information you could provide would be greatly appreciated.

Thank you,

XXXXX

June 21, 1995

Re: Request For Advisory
Opinion - No. 95-023DJ

Dear XXXXX:

You requested an advisory opinion as to the taxability of retirement
income to the State of Utah earned and received from California.

Our research indicates as follows:

A Utah resident must report on the Utah individual income tax return
all income received regardless of the state where the income was earned or may
be taxed. However, a Utah resident
would be entitled to a credit for individual income taxes paid to another state
on that income included on the Utah return.

Utah Code Ann. Sec 59-10-106(1) states �A resident individual shall be
allowed a credit against the tax otherwise due under this chapter equal to the
amount of the tax imposed on him for the taxable year by anther sate of the
United States, the District of Columbia, or a possession of the United States,
on income derived from sources therein which is also subject to tax under this
chapter.�

The affect of this credit is that a taxpayer will not pay Utah taxes on
income that has been taxed in another state at a rate equal to or greater than
the Utah rates.

This opinion is based upon the facts presented in your letter. Obviously, if there are deviations from
these facts, this opinion may be negated.

If you do not agree with this determination, you may appeal to the Tax
Commission for a formal hearing. The
results of that hearing would constitute a declaratory judgment and would be
appealable to the Utah State Supreme Court.
A Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights
are attached.

Respectfully,

Alice Shearer

Commissioner

Re: Request for Advisory
Opinion - No. 95-023DJ

Dear XXXXX:

You requested an advisory opinion as to the taxability of retirement
income to the State of Utah earned an received from California.

Our research indicates as follows:

A Utah resident must report on the Utah individual income tax return
all income received regardless of the state where the income was earned or may
be taxed. However, a Utah resident
would be entitled to a credit for individual income taxes paid to another state
on that income included on the Utah return.

Utah Code Ann. Sec. 59-10-106(1) states �A resident individual shall be
allowed a credit against the tax otherwise due under this chapter equal to the amount
of the tax imposed on him for the taxable year by another state of the United
States, the District of Columbia, or a possession of the United States, on
income derived from source therein which is also subject to tax under this
chapter.�

The affect of this credit is that a taxpayer will not pay Utah taxes on
income that has been in another state at a rate equal to or greater than the
Utah rates.

This opinion is based upon the facts presented in your letter. Obviously, if there are deviations from these
facts, this opinion may be negated.

If you do not agree with this determination, you may appeal to the Tax
Commission for a formal hearing. The
results of that hearing would constitute a declaratory judgement and would be
appealable to the Utah State Supreme Court.
A Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights
are attached.

Respectfully,

Alice Shearer

Commissioner

RE: Tax on Retirement Income Information on
Other Taxes

Dear
XXXXX,

You
requested an advisory opinion as to the impact of Utah taxes on retirement
income earned and received from California, and information about sales and
property tax. With regard to the
taxability of your retirement income, our research indicates as follows:

A
Utah resident must report all taxable income on the Utah individual tax return
regardless of where the income was earned.
However, a Utah resident is entitled to a credit for individual income
taxes paid to another state on that reported income. The credit allowed on the Utah return for taxes paid to another
state is the smaller of the following:

1. the amount of tax paid to the other state;
   or

2. a percentage of the total Utah tax,
   determined by dividing the total federal adjusted gross income into the amount
   of the federal adjusted gross income taxes in the other state.

The
effect of this credit is that a taxpayer will not pay Utah taxes on income that
has been taxed in another state at a rate equal to or greater than the Utah
rates.

You
also requested information about sales tax.
All retail sales of tangible personal property and certain services
performed in Utah are subject to Utah sales tax. The statewide tax rate is 5.875%, but most communities have
imposed additional local taxes which increase the sales tax rate. Although the tax rate varies from community
to community, the tax rate in most Wasatch Front communities is 6.125%.

Finally,
unless specifically exempted, all personal and real property is subject to
property tax. Household furnishings are
exempt from property tax on only 55% of the assessed value of their primary
residence. All other property is
assessed at 100% of value.

Motor
vehicles are taxed at 1.7% of value.
All other property is taxed at a local rate. That rate varies from community to community. You mentioned that you may move to the Logan
area. Although the tax rate for Logan
City has not been set this year, we can estimate that rate to be approximately
1.185%. The tax rate may vary for
property outside Logan City proper.

I
hope this information is helpful to you.
If you have additional questions, please let us know.

For
the Commission,

Alice
Shearer

Commissioner