Many thanks for the fast answer and the time you spent on it. I’ve delayed in following up because I have been going around in circles on my Georgia return but I’ve finally got a handle on it. My question probably wasn’t as clear as it could have been. It wasn’t my pension benefits that were being allocated to Georgia, it was Georgia’s Maximum Retirement Income Exclusion amount. All of my pension was entered as non-Georgia income, but TurboTax was still using the Maximum Retirement Income Exclusion as an offset to my Georgia income. I was troubled by why I was getting a benefit on my Georgia taxes based on non-Georgia income.
Turns out that this is totally appropriate, but there’s a twist that TurboTax has caught but H&R Block Software 2022 seems to have missed. The amount of the Exclusion is calculated separately for earned versus unearned income with each prorated based on the ratio of Georgia income to non-Georgia income regardless of whether or not Georgia income includes any pension income. These prorations is not apparent from the tax forms themselves (Schedule 1 of Form 500 in particular) but are clearly shown in the example calculations shown on page 17 of Georgia Form 500 IT-511 Individual Income Tax Booklet.
While TurboTax takes both prorations into account, I believe there is still an error in how the two are coordinated. The maximum for earned income is the lesser of Georgia earned income or $4,000. The maximum for unearned income ($35,000 or $65,000 depending on age) is first reduced by the portion of the $4,000 used for earned income. If there is no Georgia earned income, as in my case, none of the $4,000 is used. However, TurboTax reduces the overall maximum by the amount of the earned income (presumably no more than $4,000; being retired, by earned income was less than that). For example, someone over age 65 with $3,500 of earned income, none of which is from Georgia, would have no Exclusion for earned income. But rather than prorating the full $65,000, TurboTax first reduces it to $61,500 resulting in a lesser subtraction from Georgia income.
