Q. I retired under CSRS in Washington state in 2011. Washington has no state income tax. If I decide to move to another state that does have state income tax, will my annuity be taxed by that state? What if I decide to become an expat and live in Mexico? Can I do that without affecting my pension? Do I have to have a U.S. mailing address?
A. If you move to another state, the taxability of your annuity will be determined by the laws of that state. If you moved to another country, some of your annuity might be taxable under its laws; however, you could claim a credit for that and reduce your federal tax liability. There is no requirement that you have a stateside address if your permanent address is in a foreign country.