State tax guides
401(k) Rollover Tax Rules by State
A correctly executed direct rollover has no state tax consequence in any state. A failed rollover adds state income tax on top of the federal bill — and in high-tax states like California and New York, that can be tens of thousands of dollars. Find your state below.
High-tax states — read before rolling
Californiaup to 13.3%
2.5% additional penalty if under 59½
New Yorkup to 10.9%
No additional NY early-distribution penalty (federal 10% still applies)
New Jerseyup to 10.75%
No additional NJ penalty (federal 10% still applies)
Massachusettsup to 5%
No additional MA early-distribution penalty
Oregonup to 9.9%
No additional OR early-distribution penalty
Pennsylvaniaup to 3.07% (under 59½)
No additional PA early-distribution penalty (federal 10% still applies)
Illinoisup to 4.95% flat — but retirement distributions are subtracted
No additional IL early-distribution penalty (federal 10% still applies)
Ohioup to 2.75% flat (2026, above $26,050)
No additional OH early-distribution penalty (federal 10% still applies)
Georgiaup to 4.99% flat (2026)
No additional GA early-distribution penalty (federal 10% still applies)
North Carolinaup to 3.99% flat (2026)
No additional NC early-distribution penalty (federal 10% still applies)
Michiganup to 4.25% flat (2026)
No additional MI early-distribution penalty (federal 10% still applies)
Virginiaup to 5.75%
No additional VA early-distribution penalty (federal 10% still applies)
Arizonaup to 2.5% flat
No additional AZ early-distribution penalty (federal 10% still applies)
Coloradoup to 4.40% flat (2026, subject to TABOR certification)
No additional CO early-distribution penalty (federal 10% still applies)
Minnesotaup to 9.85%
No additional MN early-distribution penalty (federal 10% still applies)
No-income-tax states
These states have no personal income tax — your rollover has zero state tax exposure.
The one move that eliminates all state tax risk
In every state listed above, a correctly executed direct rollover — custodian-to-custodian, no check issued to you — has zero state tax consequence. The entire state-level exposure comes from indirect distributions that miss the 60-day window, or rollovers that were miscoded as taxable distributions.
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