NM part-year resident return not handling other state income allocation and tax credit properly

Forum|Forum|3 months ago
March 23, 2026
1 reply
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How do I make TT recognize which parts of the total federal income are coming from different states?

My daughter retained NM tax residency while doing a graduate degree in California (in CA only for educational purposes, no in-state tuition rate, lived on campus, drove our NM-registered car with her valid NM license, voted in NM, bank account in NM). She finished in summer 2025, moved to MA for a job, and officially became a resident there in mid-August. While a non-resident in CA, she received a fellowship reported on a W-2 with CA taxes withheld, and of course after she became a MA resident, she received pay with MA tax withheld on a W-2 from her employer there. After preparing her federal return in desktop TT on Windows, I prepared her CA 540NR, then her MA Form 1-NR/PY (part-year resident there too), and then finally her NM PIT-1.

NM taxes residents on their full income *while they are tax residents*, and in past years as a student the TT worksheets for NM have always offered me one for the PIT-B to apportion the income between NM and other states, and another worksheet to calculate the credit for taxes paid to CA (which goes on line 20 of the PIT-1). As a result, she only owed NM the difference between what the two states assess.

This year, even though TT knows that she was a CA non-resident, has the data in the completed CA 540NR, and knows the exact date she ceased to be a NM resident and became a MA one, it is giving me fits.

On the NM "Wages, Salaries, Tips" screen, it showed her total federal income for the whole year and then defaulted to deciding that $0 was taxable by NM, which is incorrect. So I specifically entered the amount of CA non-resident income as NM income, i.e. without the MA portion of the federal total (not taxable by NM). Despite this, TT does the NM return incorrectly in two ways:

1. On the PIT-1, it starts with the total federal income for 2025, but never adjusts for the fact that some of this, from MA, is *not* taxable by NM because she was no longer a NM resident when it was received.

2. The PIT-B shows a column for federal and a column for NM, but not one for the CA income. Then it completely skips over the credit for CA taxes paid, which is supposed to be calculated and entered on line 20, so it charges her the full amount of NM tax on that income. Nowhere in the Forms view is there a worksheet for the line 20 credit, and it is not attaching her CA return with the NM one, as required to support the credit.

How do I make TT understand that the NM-taxable income was from the CA return, so that the apportionment and credit for tax paid to CA can be handled properly? Is there a way to manually force it to generate the tax credit calculation worksheet? And why is it trying to tax her entire federal income when some of it is from after she moved to MA, and it was given the subset amount that NM should work with? This is very frustrating, and has not been a problem in previous years..

Thanks for any pointers.

RogerD1

Level 6

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

Sign into your online account.
Locate the Tax Tools on the left-hand side of the screen.
A drop-down will appear. Select Tools
On the pop-up screen, click on “Share my file with agent.”
This will generate a message that a diagnostic file gets sanitized and transmitted to us.
Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

Open your return.
Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
This will generate a message that a diagnostic copy will be created. Click on OK and the tax file will be sanitized and transmitted to us.
Please provide the Token Number (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

NM1Author

Level 5

@RogerD1

[Edited to restore the token number, part of which the forum software decided was a phone number and replaced. So I have put spaces in between the digits of that part before the dash. Let me know if it isn't clear.]

Thank you so much for this. I have generated the file (was quicker than I expected). The token number is 1 3 4 7 6 6 2 1 7 5 -61309110. Note that I have tried a few different things to make TT do the right thing, most recently deleting the NM and MA state returns (leaving only federal and CA non-resident), then re-doing the NM one next (instead of MA). In theory that made it more like in previous years when there was no third state and it apportioned income/credited tax on the PIT-B properly. Unfortunately that experiment did not change anything. So I re-created MA as well, and the file again has all three states.

Section III of the Personal Worksheet (under federal paperwork) correctly shows the data I provided to TT for her state of residency on 12/31/2025 (MA). I also told it that she was a part-year resident there, along with the date of the change, and specified NM as the previous state of residency. This *ought* to make it treat her as a tax resident in NM for the first part of the year, but it seems like instead it considered her a non-resident, based on originally defaulting to 0 for NM income in the manual apportionment step of the questionnaire. It apparently didn't recognize that as being from CA. I'm not sure how it could, really, given that none of the income statements have anything to indicate *when* that income was received, only who paid it in what state, and maybe that's not enough for TT to figure out what to do with it. I did not see anything in either the questionnaire steps or the forms I looked at directly that allows me to associate income with dates.

The basic concepts of state residency and income apportionment are straightforward enough, but I realize that finding the cause and solution may be complicated. I *really* appreciate your help. If it turns out that a conversation is better, please let me know how to securely give you my phone number, or how to reach you. Thanks again.

RogerD1

Level 6

I've done some in-depth research on your situation with your daughter's return and have come to the conclusion that the way that TurboTax is calculating the New Mexico income tax is correct.

The big difference from 2024 to 2025 for your daughter is likely that she was considered a resident of New Mexico in 2024 and can only be considered a part-year resident in 2025. New Mexico requires a physical presence of 185 days in the state to qualify as a resident - since your daughter was away in California at school for part of the beginning of 2025, it seems unlikely that she would have had a physical presence of 185 days, so a part year resident status would be correct. You may want to double-check to be sure though, because it could make a difference.

The difference is because the credit for taxes paid to other states is only for a New Mexico resident. Part-year residents and non-resident are not able to take the credit. The following is from the New Mexico PIT-1 instructions on page PIT-1-28:

"LINE 20. Credit for Taxes Paid to Another State A resident of New Mexico who must pay tax to another state on income that is also taxable in New Mexico may take a credit against New Mexico tax for tax paid to the other state. IMPORTANT: This credit is for tax that another state imposes on any part of income that by law is included in a New Mexico residents net income. When calculating the allowable credit, do not include tax withheld. If the specific item of income is not subject to taxation in both states, no credit is available. The credit may not be more than:

• The New Mexico tax liability due on your PIT-1,

• The tax you paid to the other state.

• The amount of New Mexico income tax liability calculated on the part of income taxed in both states.

Complete the "Line 20. Worksheet for Computation of Allowable Credit for Taxes Paid to Other States by New Mexico Residents" on page PIT-1-31 You must attach all of the following to your PIT-1:

• A copy of the worksheet(s), and

• Income tax return(s) from the other state(s).

If you are not filing as a resident of New Mexico, income should be allocated using the Schedule PIT-B."

I did see the PIT-B worksheet in your return and it had only the California income allocated to New Mexico (and also some other income from investments). The tax that is calculated is based on that income and, unfortunately, there is no credit available for taxes paid to other states for a part-year resident.

However, if you can show that your daughter qualified as a resident by being physically present in the state for 185 days or more, then all of her income from both states will be taxable, but the credits for taxes paid to other states would be available and that could potentially make a difference in the outcome that you are seeing.

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