Any special Pennsylvania W-2 situations?

[ermatiasfranco]

Me and my husband live in PA, but my husband works in NJ. We decided to file our taxes together, but on the PA taxes a page appears that says *Any special Pennsylvania W-2 situations?* in which we select the options (you earned income in another state) and (you were a resident of PA working in another state or country and your employer did not withhold PA income tax) because my husband's employer removed taxes from NJ and not from PA.

do we choose well? And if so, what should I put in the following questions that say I should create a statement? 

[AmyC]

You did great, you just need to indicate that he works in NJ so that it makes sense that you are asking PA for a credit based on the NJ income. Your resident state taxes all income but gives a credit for income taxed by another state.  Please carefully follow these directions to prepare the states in a special order. You may need to delete both states and begin again.

1. First, prepare your non-resident NJ return. This creates your tax liability for the non-resident state. How do I file a nonresident state return?
2. Then prepare your resident state PA return and it will generate a credit for your income already being taxed in the non-resident state. 
3. The credit will be the lower of the state tax liabilities on the same taxable income. You may owe your resident state,  if they have a higher tax rate along with differences in how the taxable income is calculated.

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.

You get credit for the lower state tax on the lowest taxable amount.

• Each state calculates taxable income differently.
• Each state has its own tax rate/ system.
• You get the lowest of both categories as a tax credit.

Good job!