Taxing questions – both state and federal – get the attention of "Ask the Experts" this week. Here with the answers are Sacramento CPA Gregory Burke and state Franchise Tax Board specialist Daniel Tahara.

To see more of their free tax advice, go to: www. sacbee.com/personalfinance blog. That's where you can also find advice and ask questions of our other local experts on investing, personal finances, wills, trusts and job hunting.

I am retired from state service and receive my pension from CalPERS. I am thinking of moving to another state. If I do, will I have to continue paying California income tax? Will my income from the California pension be subject to income tax in the state to which I relocate?

As of Jan. 1, 1996, California no longer taxes nonresidents on pension income they receive due to services performed in California.

However, any pension income received while you are still a California resident is taxable. If you move out of California on June 30, for example, your pension income would be taxable for the first six months of the year.

Whether or not your California pension income is subject to income tax in another state would depend on the tax laws in your new state of residency. You would need to look into that state's tax laws.

For more details and examples of nonresident tax issues, go to www.ftb.ca.gov and look for FTB Publication 1100, "Taxation of Nonresidents and Individuals Who Change Residency."

Over 40 years ago, my husband and I purchased whole life insurance policies. Over time, we also took out policies on our children. We didn't always have enough money to pay the premiums, so our agent suggested we borrow from some policies to pay premiums on others. We've been doing this for years and the loans against the policies are large.

We are retired now and still pay every month on these policies. We'd like to get out from under the premium payments. If we pay off each policy and cash them in, would we owe taxes on the cash value? Thank you.

The cash surrender value of a life insurance policy consists of two parts: the net premiums you have paid in and earnings on those premiums.

The portion of the proceeds representing the premium amounts you've paid is not taxable. It is considered a return of your investment. The portion that is earnings would be taxable.

Your insurance agent should be able to tell you how much of the net proceeds will be subject to tax. That way you can determine how much tax will be owed and can set aside the money. You may want to discuss whether you need to repay the loans before cashing out the policies or if the loans can be repaid from the proceeds.

If the additional tax on the policy earnings is substantial, you may need to make estimated payments for federal and state taxes. Consult your tax adviser if you are concerned about how much additional tax you may owe.

– Compiled by Claudia Buck

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