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Category: State Tax Questions

Why should I not take the credit for taxes paid to another state on a Nonresident state return?

Generally, nonresident returns figure your tax based only on the income that was earned in the nonresident state (unlike resident returns, where your tax is generally figured based on all of your income, regardless where it was earned). Because the tax is based solely on the income that was earned in that state, you generally cannot take the credit for taxes paid to another state.

Important: This credit is not simply a credit because you paid taxes to another state. It generally is only intended to be used to offset a tax liability that is calculated based on income that was taxed by another state.

 

Other Common questions about the credit for taxes paid to another state include:

When should I claim the credit?
Part Year Returns: Why should I not take the credit on a Part Year state return?
When can I take the credit on a Part-Year or Nonresident state return?
What amount should I enter for the amount of tax that I paid to the other state?