I live in California and have rental income from rental property in Arizona. California it seems does not allow tax credit for tax paid to Arizona. Is this correct?

[DanielV01 · Accepted solution]

It is correct.  California and Arizona are reverse credit states.  In this case, California taxes all of your income, and then you claim a credit on the Arizona return for taxes paid to California on the rental income.  You will still file both states, but you will prepare the California return first, and then the Arizona return.  You will have a screen that will allow you to claim the credit for California taxes on your Arizona return.

[sukarna]

Thank you! Any idea how I can check in Turbo Tax the  amount of tax CA charged for this rental income after completing the CA return and before going through AZ return?

[DanielV01]

It should carry over.  If not, then two steps.  First, take the amount of CA taxes you paid in and subtract CA refund or add in CA tax due.  Once you have that, then multiply that number by the CA rental income, and divide by the total CA income.  The remaining amount is the amount of tax you are paying to CA on the rental income.

[sukarna]

It got carried over, thank you. Turbo Tax just put the same amount for credit as AZ would have charged in taxes otherwise. Turbo Tax showed a warning that CA return copy should be included along with AZ return. I am assuming Turbo Tax will do it automatically if filing electronically.

[DanielV01]

TurboTax will file required documents electronically, but always print out your tax return in case you are asked to produce it.