Claiming other state tax credit

[state-taxes]

Hi,

I moved from California to New york in the middle of the year and there are parts of my income (RSUs) which are taxed by both California and New York.

I understand and I need to claim an other state tax credit for this. I had some questions:

1. For the first prompt asking "Enter the portion of the following income that was taxed by California", do I enter only the amount that was taxed doubly or whatever is listed on my W2 for California?

2. What do I enter for "Turbotax does not currently compute an amount of tax for California. If this is incorrect, enter the tax below". Is this just my total withholdings on my W2 minus any California refund?

When I enter the amount that was taxed doubly for step 1, and withholdings on W2 minus california refund, the credit received is only ~$2200, but it should be closer to $3000.

Thank you

[AnnetteB6 · Accepted solution]

If you were a part-year resident in two states during the year, you will split your income between those two states based on your time of residency in each.  The income and taxes for each state will be prorated and a tax credit for taxes paid to another state will not apply.

Claiming a tax credit for taxes paid to another state is for the situation where you lived in one state, but had income from another (non-resident) state and were required to pay tax to the non-resident state.  Then, you could claim a credit on your resident state return so that the income was not taxed by both states.

[state-taxes]

I don't believe this is 100% correct. For basic salary/bonuses, I agree. 

But in my case, for RSUs that were granted in California but vested in New York, I was taxed with both NY state + city tax as well as California State tax. This is even shown in my stock statement that I was doubly taxed.

[DMarkM1]

As @AnnetteB6  stated, there should not be an overlap for taxation since you moved and are filing part-year returns.  The RSU transfer/granting/vesting income is included in your W2 box 1.  When you allocate wages to CA and NY you will use the percentage of time you were in each state to divide the box 1 wages.  If you also sold some/all of the RSUs whatever 1099-B income generated there, separate from your W2 wages, is taxed by the state you were in when the sale happened.  There will be no credit for taxes paid to another state in your situation.  

Even though the statements might show taxation of some income by both states, when you file your returns that is reconciled based on the correct allocation you make and if a state over taxed on the income that actually belongs to them you will be refunded by the taxing state; not credited by the other state.   

[state-taxes]

Hmm ok I see, so to follow up. Lets take this example:

Moved from California to NY on 10/1/23 (stayed at same job).

Box 1: $150,000

California State Wages (box 16) : $120,000

NY State Wages (box 16) : $150,000 (NY has entire amount listed for state just to find correct tax % and then prorates later). 

Local wages NYC (box 18) show how much I actually earned in NY alone: $50000

I can calculate how much I earned in California by doing Box 1 - Box 18 (150,000 - 50,000) = $100,000.

But my W2 lists my California state wages at $120,000, meaning I was taxed on $20,000 by both California and NY.

If I am understanding your answer correctly, this will be handled when I update my wages earned in California to $100,000 and will be credited in my California tax return.

Is this correct?

Thank you!

[DMarkM1]

Yes.  You got it!