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Category: Connecticut

Connecticut Credit for Taxes Paid to Another State

If you live in Connecticut and work in another state, you may be eligible for another state tax credit. This will be automatically calculated within your TaxSlayer account when you add a Nonresident return for the state in which you paid income taxes.

A Connecticut resident who works in another state that imposes an income tax will be required to file a Nonresident income tax return for the other state and a Resident return for Connecticut. The Connecticut resident will receive credit from Connecticut for income tax paid to the other state on income earned for services performed in the other state. The credit allowed will be the lesser of the tax paid to the other state or the tax which Connecticut imposes on the resident's out-of-state wages. You must also attach a copy of your return filed with the qualifying state(s) or the credit will be disallowed.Note: TaxSlayer will automatically submit the additional return on your behalf when you electronically file your return.

A qualifying state (jurisdiction) includes another state of the United States, a local government within another state, or the District of Columbia. A qualifying state (jurisdiction) does not include the State of Connecticut, the United States, or a foreign country or its provinces (for example, Canada and Canadian provinces).

Qualifying Income Tax Payments

Qualifying income tax payments are income taxes you actually paid on income:

  • Derived from or connected with sources within the qualifying jurisdiction; and
  • Subject to tax in the qualifying jurisdiction

Income Derived From or Connected With Sources Within a Qualifying State (Jurisdiction)

  • Compensation received for personal services performed in a qualifying jurisdiction;
  • Income from a business, trade, or profession carried on in a qualifying jurisdiction;
  • Gambling winnings from a state-conducted lottery; or
  • Income from real or tangible personal property situated in a qualifying jurisdiction.

Note: Income from intangibles, such as stocks and bonds, is not considered derived from or connected with sources within a qualifying jurisdiction unless the income is from property employed in a business, trade, or profession carried on in that jurisdiction.

What Payments Do Not Qualify

  • Income tax payments made to a qualifying state (jurisdiction) on income not derived from or connected with sources within the qualifying state or jurisdiction (such as wages not derived from or connected with sources within the qualifying jurisdiction);
  • Income tax payments made to a qualifying state (jurisdiction) on income not included in your Connecticut adjusted gross income (AGI);
  • Income tax paid to a state (jurisdiction) that is not a qualifying jurisdiction, including a foreign country or its provinces (for example, Canada and Canadian provinces;
  • Alternative minimum tax paid to a qualifying state (jurisdiction);
  • Income tax paid to a qualifying state (jurisdiction) if you claimed credit on that state or jurisdiction's income tax return for income tax paid to Connecticut; or
  • Penalties or interest on income taxes you paid to a qualifying jurisdiction.

For additional assistance, please see Schedule 2 Worksheet.