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Category: State Tax Questions

Credit for Taxes Paid to Another State: What amount should I enter for the amount of tax that I paid to the other state?

The amount of tax that you report as being paid to the other state is NOT the amount that you had withheld by the other state. It is the amount of tax that is calculated on the other state return. Before entering this amount, you must first view the PDF of your other state's return to view the amount of tax. DO NOT just report the amount that you had withheld (from your W-2, for example).

Why?: The amount that you receive as a credit should be based on the amount of tax that you actually pay to that other state. If you had $1000 withheld during the year, but file that other state return and receive a $250 refund, the amount of tax you actually paid to the other state technically was only $750. On the other hand, if you had $1000 withheld, and you file that other state return and end up owing an additional $150, the amount of tax that you paid to the state was $1150. Reporting the amount that you had withheld, from a W-2 for example, could result in a larger or smaller credit than you are actually entitled to.

To correctly figure your credit (if you are manually entering your credit for taxes paid to another state), you need to actually prepare and view your other state return to make sure you receive the correct amount.

 

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?
Nonresident Returns: Why should I not take the credit on a Nonresident state return?
When could I take the credit on a Part-Year or Nonresident state return?