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Category: Alabama

Alabama Credit for Taxes Paid to Another State

If you have income from sources outside of Alabama and paid income tax to the other state, you may be eligible for a credit on your Alabama return.

The Credit for Taxes Paid to Another State is provided to taxpayers to prevent double taxation of income and is only available to legal residents of Alabama filing Form 40 who have income from sources outside of Alabama that is being taxed by Alabama and another state (or territory of the United States) in the same tax year. Residents of Alabama for only a part of the tax year can claim this credit only if the returns filed with Alabama and other states cover the same periods.

**No credit is allowable when the income from sources outside of Alabama is totally offset by a corresponding deduction. However, income from sources outside of Alabama that is reported on the return and not totally offset by a corresponding deduction may result in a credit. In such cases, the credit is limited to the lessor of the tax actually due to the other state or territory or the amount that would be due on the same income computed at the income tax rate in Alabama. For example, please see Alabama Schedule CR

Note: If you are filing a Resident Alabama return and also prepare a Nonresident return for another state, the TaxSlayer program will automatically calculate the allowable credit for you. If you have a Part Year return added to your account, you must complete the requested information asked of you within the Alabama state program.