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AZ state taxes; the FEIE and Arizona sourced income

I earn $70,000 working for a company in Arizona but I have moved and live/work overseas.

I claim the FEIE on my Federal taxes. I also have a rental property in Arizona.

On my AZ state taxes, it asks me to enter the Arizona portion of monies earned. For the rental, that's easy.

Under "Other Income", there is a -$70,000 in the Federal column (corresponding to the FEIE) and I am asked to enter the Arizona amount.

I believe that since all my work is performed abroad then none of the $70,000 is Arizona sourced. However if I put 0 in the Arizona column I then have a tax liability. Do I in fact put a -$70,000? It just seems a little counter-intuitive to me?

Thanks

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AZ state taxes; the FEIE and Arizona sourced income

Yes, this seems counter-intuitive. It would be easier to understand if this were a positive number, but as Arizona says "First, Arizona law states that residents are taxed on the same income they report for federal purposes, "

 

If you don't report this -$70,000 in the box where TurboTax is asking for the Arizona amount, then you will need to go back to the line where you are asked how much of the (positive) $70,000 income belongs to Arizona (assuming that it is a single income item) and enter -0- for the Arizona portion.

 

That is, if you reported the positive income as belonging to Arizona (even the excluded income) then you need to report the exclusion as belonging to Arizona.

 

I am sure that this is not the first time that the state authorities have seen this. 

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Expert Alumni

AZ state taxes; the FEIE and Arizona sourced income

Yes, this seems counter-intuitive. It would be easier to understand if this were a positive number, but as Arizona says "First, Arizona law states that residents are taxed on the same income they report for federal purposes, "

 

If you don't report this -$70,000 in the box where TurboTax is asking for the Arizona amount, then you will need to go back to the line where you are asked how much of the (positive) $70,000 income belongs to Arizona (assuming that it is a single income item) and enter -0- for the Arizona portion.

 

That is, if you reported the positive income as belonging to Arizona (even the excluded income) then you need to report the exclusion as belonging to Arizona.

 

I am sure that this is not the first time that the state authorities have seen this. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

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