@ncabaloff
You will have to manually allocate your income across the two state tax returns. Massachusetts will tax all of the income that was paid to you while you were living in Massachusetts, and they will tax the bonus on a prorated basis, even though it was paid to you in California. I believe the Massachusetts income tax rate is 5%.
Then, on your California tax return, you will pay income tax on all of the income that was paid to you, while you were living in California including 100% of the bonus, even though most of it was earned while you were working elsewhere. I believe the California tax rate is around 10%.
Then you will need to figure out how much of your income is being taxed in both states. It sounds like that would be 75% of the bonus. in other words, 75% of the bonus is being taxed in Massachusetts at 5%, and 100% of the bonuses being taxed in California at 10%. You can claim a credit on your California tax return equal to the amount of double taxation you are paying in Massachusetts, in other words, 5% of 75% of the bonus. The end result is that the bonus is fully taxed in Massachusetts, and partly taxed in California, and the total amount of tax you pay on the bonus (after deducting the credit) is equal to the tax you would’ve paid in the higher tax state.
