Getting other state tax credit when I haven't paid taxes yet for resident state?

Forum|Forum|5 years ago
March 9, 2021
1 reply
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I lived and worked in New York until march of 2020, and then i moved to California in March while continuing to work remotely for my company based in New York. Throughout 2020, I continued paying taxes to New York without paying any taxes to California. Because of this, TurboTax says I owe taxes to California.

When filing my CA state taxes, there is an option for "Other State Tax Credit." Clicking "Learn More" for this says "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." This situation sounds like it applies to me, since I paid all my state taxes to New York throughout the year, but I still owe taxes to California.

However, when I click on the option, it says "Were you residing in California when you earned this income that was taxed by both California and another state?" Like I mentioned before, I haven't actually been taxed by California yet, but I will be paying taxes that I owe to California once I do submit my return.

I want to make sure that I won't be double taxed by California and New York. Am I able to claim this "Other State Tax Credit", since I am going to be taxed by California for my income earned while living there once I pay the amount I owe? Or, is the amount that TurboTax says I owe to California already accounting for the amount that I've paid to New York?

AmyC

Level 15

Yes, you will claim the credit. The income will be taxed by both states and CA will give you a credit. Your resident state taxes all income but gives a credit for income taxed by another state. Please carefully follow these directions.

You will need to prepare the states in a special order. You may need to delete both states and begin again.

First, prepare your NY return.
THEN prepare your CA return and it will generate a credit for your income already being taxed in NY
The credit will be the lower of the state tax liabilities on the same income. You may owe your resident state.

It isn't possible for the program to create a credit before it knows the liability. Your returns may be wrong if you do not prepare the states in this order.

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misterdifficult8Author

Level 2

I see, so are you saying I don't need to manually enter any info into the "Other State Tax Credit" form on the California return?

LenaH

Employee Tax Expert

No. On the California interview screen titled Other State Tax Credit Summary, click Edit next to NY. You will be prompted to enter the type of income (wages), as well as the income taxed by California and the income taxed by New York. This will be the amount of New York wages earned in California.

Then, you will enter your income tax paid to New York and the Adjusted Gross Income Taxed by New York on the page titled Income Tax Paid to New York.

You can get these figures by following the steps below:

Open your return.
Click on Tax Tools on the left hand side.
Click on Tools.
Click on View Tax Summary.
Click on NY Tax Summary.
On the screen Summary of New York Taxes, you will see your NY adjusted gross income and your NY tax.

Once you enter these figures into TurboTax, your credit for Tax Paid to New York will be calculated for you.

[Edited 3/13/21 l 9:51AM PST]

@misterdifficult8

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