My husband recieved retirement distribution over 300,000 while living in NM. Paid federal & NM taxes. can I subtract this amount from federal on my Virginia State tax?

[boomersf15e]

Can I subtract the $299,000 from federal on my VA state tax since I am paying taxes on this in NM based on my federal taxes?

[MichaelMc · Accepted solution]

No. The starting point for computing Virginia income tax is Federal Adjusted Gross Income, you may not make any modification of the amounts on your federal return prior to bringing that information into the Virginia return.

However, Virginia does provide a credit for taxes paid to other states, mitigating the effect of income being taxed in multiple states.

I am mildly concerned about the phrasing of your question. You begin by referring to a distribution received by your husband, and then ask about its effect on "my Virginia State tax." My answer only holds if your and your husband are filing jointly in Virginia. If you file separately, his retirement distribution will have no impact on your Virginia tax return.

[TerryA]

When doing your part-year VA return, remember that VA can't tax any retirement distribution(s) received while you were living in NM. TT/VA will let you remove income earned while a resident of NM from your starting-point federal AGI.

[boomersf15e]

Yes...that's what I wanted to know.  How do I do that?  As a subtraction from Federal Income?  If so, what do I put in the box as a description?

[TerryA]

TT/VA will ask you to make income allocations. I don't know if it's income item by item, or one big "Enter non-VA income". Some states want you to indicate item by item how much is State-source. Just go through TT/VA and you will come to it.

[boomersf15e]

I am on the form 760PY.  Turbo tax asks for "Other Subtractions from Federal Income.  Is this where I put it?

[TerryA]

The VA allocations are done on the "Schedule of Income" and it's one of those "item by item" states. If you have federal wages TT/VA will ask how much of that was earned "While VA Resident" (or vice versa "While NOT VA Resident"). There's a "Pension and other income" item - you will see the federal amount and you should enter whichever amount TT/VA is asking for ("While VA Resident" or "While NOT VA Resident". it won't ask for both).

[boomersf15e]

Is this under my State Taxes?  I'm sorry, I am having trouble finding a "Schedule of Income".

[TerryA]

It's probably not called that in TT/VA Step-by-Step - it tries not to be "taxy" sounding. It may be something like "Nonresident Adjustments" or something like that. It may be listed amongst other things where you would have to click a "Start" button.

All you have to do is go thru TT/VA and **look** for the opportunity to allocate income.  Read every word on every screen. It's designed to be easy and it isn't hard to find - it's practically yelling at you to allocate income but it happens only at a certain point in the flow of screens. Look for it.

As a last resort use Forms Mode (Ctrl-2 or menu View/Forms) and open in the list of VA forms on the left what looks like it could be "Schedule of Income". If it says "Schedule of Income" at the top then that's it. Fill it out. If you don't see it there click the "Open Form" button above the list of forms and look for it in that comprehensive list.