topic Working with turbotax when filing state taxes in more than one state in State tax filing

Working with turbotax when filing state taxes in more than one state

rtoddphillips — Mon, 09 Mar 2026 08:25:11 GMT

I live in Mexico, am a resident of California, and have rental property in Oregon. Usually I file federal and California taxes, but this year the income from my Oregon property crossed the threshold so I need to file OR taxes as well. I had already finished my federal and CA return when I realized this, so I bought the OR state product to add to my taxes, but I don't understand how to work with 2 states returns at the same time. I'm looking for a way to get tax credits in one state because of tax paid in another. From my understanding there is a reciprocal tax agreement between CA and OR so I should be able to do this.

Currently I'm showing ALL income on my CA return, but only showing the rental income for my OR property on my OR return. As it is currently it doubles my state taxes by having me pay about $450 in each state, when before will all income showing on my CA return I was paying just the $450 in that state alone. Any help in using turbotax in this situation would be greatly appreciated!

Re: Working with turbotax when filing state taxes in more than one state

MaryK4 — Thu, 10 Mar 2022 20:32:00 GMT

If you completed your Oregon return, go back to the California section and look for the Take a look at California credits and taxes > credit for other state tax (see below)

If you paid taxes to a state other than California during the year, you may receive a tax credit for that on your California state taxes. That way, you won't be taxed twice on the same income.

Re: Working with turbotax when filing state taxes in more than one state

rtoddphillips — Fri, 11 Mar 2022 01:55:58 GMT

Thank you! I found it, but it says "California residents cannot claim this credit if its for tax you paid to: ...Oregon..."

I went ahead and filled everything out and got a $7 credit, which still means I'm still paying more than double the tax because the CA tax is $405 ( on ALL income including Oregon property income) and the Oregon tax is $441 on just the Oregon property income, so I'm basically paying tax on the Oregon income twice :(

Re: Working with turbotax when filing state taxes in more than one state

Beancountermom — Thu, 12 Mar 2026 22:26:39 GMT

My daughter goes to school in OR and is a permanent CA resident. The rules say that tax is adjusted so it nets out to only be taxed the equivalent of the highest tax rate (CA) on all income. I cannot find any way in Turbo Tax this is actually happening because Schedule S is disallowed for OR tax credit in CA. Where/how to I account for the OR state tax withholding and not be double counted in CA? My daughter is ending up with a tax liability in both states, which definitely is wrong and too high.

Re: Working with turbotax when filing state taxes in more than one state

DaveF1006 — Thu, 12 Mar 2026 22:47:04 GMT

Usually, California gives you a credit for taxes paid to Oregon. But in this case, the rule is reversed—Oregon, as the nonresident state, needs to give the credit instead. That’s why TurboTax doesn’t allow Schedule S on the California return. Here’s how to make sure your daughter isn’t taxed twice. Here are the order of operations that should occur.

In TurboTax, the order in which you complete the states is vital for the "Reverse Credit" to calculate correctly.

Federal Return: Complete this first.
California Return: Complete this second. Since she is a CA resident, CA will tax 100% of her income (including the Oregon wages).
Oregon Return: Complete this last. This is where the magic happens.

2. Why the Oregon Return is the Key

On the Oregon Nonresident return, you will look for the "Credit for Income Taxes Paid to Another State." Because California is a "Reverse Credit" state, Oregon will give your daughter a credit for the taxes she is paying to California on those same wages.
This credit should reduce her Oregon tax liability, often all the way down to $0 (or very close to it), effectively resulting in an Oregon refund of most of her withholding.

3. Step-by-Step in TurboTax

If you have already started, you may need to "delete" the state returns and restart them in this order to clear the "disallowed" errors:

Step A: Go to the California state section. Ensure she is marked as a Full-Year Resident. Do not try to claim an "Other State Tax Credit" (Schedule S) here. Let CA tax the full amount.
Step B: Go to the Oregon state section. Ensure she is marked as a Nonresident (since she is a CA resident away at school).
Step C: In the Oregon interview, watch for a screen titled "Credit for Taxes Paid to Another State" or "Taxes Paid to a Reverse Credit State."
Step D: TurboTax will ask for the "Taxable Income" and "Tax Liability" from the California return. Enter the numbers from her CA Form 540.
As a result, Oregon will calculate the credit and apply it against her Oregon bill.

4. Why "Schedule S" was Disallowed

TurboTax's "disallowed" message is actually a safeguard. California law (RTC Section 18002) explicitly forbids its residents from taking a credit on the CA return for taxes paid to Oregon. Instead, it requires you to claim that credit on the Oregon nonresident return.

@Beancountermom

Re: Working with turbotax when filing state taxes in more than one state

Beancountermom — Thu, 12 Mar 2026 22:54:21 GMT

Thank you so much!! I had initially done CA first, but it didn't seem right. Then, I found guidance exactly the opposite of what you're saying, so I went back and re-did OR first. I will go back again. Your step by step guidance is really helpful. Thank you! I think the thing is to not let her work in other states anymore!!