Determining the Non-refundable credit for schedule U for Washington DC for credits for other states

[khbloomer]

I lived in Maine for 5 months in 2024 and Washington DC for 7 months.    I ended up owing  a total of $890 in tax to Maine.      I made ~ $35k in Washington DC in 2024.      DC withheld $2159 from my paycheck.     The calculation of the taxes that I owe to DC (Line 20 on the D40 form) is $1359.     

When I fill out the DC state tax forms using Turbo Tax, it ends up giving me a credit of $1359 on Schedule U.

(Part I Credits; a Non-refundable Credits).   

1. Enter State Income tax credit.

State (a) Maine    $1359.   

The $1359 credit then goes to Line 22 of the D40 form and then I end up getting back all $2159 that was withheld.  I don't understand how the credit on Schedule U is $1359.  Shouldn't it be $890 which is the actual amount that I owe Maine?   How can the credit on Schedule U be greater than what I actually paid in taxes to Maine?

[MayaD]

Was the same income taxed by Maine and DC? 

The District allows credit on income and fiduciary tax returns for taxes paid to other states on incomes taxed by the District. 

If you lived in two different states during the tax year (for example, if you moved from one state to another), you'll usually file part-year returns in both states and allocate your income between the two states. 

How do I file a part-year state return?

How do I allocate (split) income for a part-year state return?

[khbloomer]

Thank you for your reply. 

Was the same income taxed by Maine and DC? 

Yes, the only income that I made in Maine was tax free to both Federal and Maine.  I sold a condo that I had lived in for 3 years at a profit.    However, I still had to pay tax in Maine was on the income (wages) that I made in DC.  I had to pay $890 to Maine on these wages.      These wages are also taxed in DC (obviously) and I understand that DC would give me a credit for the $890  of taxes that I paid to Maine, however the credit that I get in the DC return (Schedule U) was $1359.   I don't understand how I can get a larger credit on the DC return than the actual taxes that I paid to Maine?    

[MaryK4]

If you only made money in DC, you do NOT report it on your Maine income tax return.  This will remove the tax paid to Maine and the credit for taxes paid to another jurisdiction on your DC return so you will pay the proper taxes to DC.  @khbloomer 

[khbloomer]

Thank you for the post.     However, this is not my understanding is not how it has been handled by Turbo Tax.     I was a part-year resident.   Here is the definition from the Maine website:

"Part-year residents, nonresidents and safe harbor residents must file a Maine return based on their total federal adjusted gross income.   You tax liability is first calculated as if you were a resident of Maine for the entire year.   You are then allowed to calculate a nonresident credit on Maine Schedule NR that will reduce your Maine tax by the portion of the tax that is related to the income your earned outside the state while a nonresident or safe harbor resident of Maine.   

[DianeW777]

Yes, this nonresident credit is strictly calculated to remove or credit the tax calculated on the entire year's income which is the first calculation on the Maine (ME) return. The credit for your part year residency has nothing to do with a 'credit for taxes paid to another state on the same income'. Tax calculations on several states start with the federal income and then is adjusted in situations like yours.

It seems the credit should be correct as it stands because it has nothing to do with the DC part year resident return. The key information in your post from the ME instructions is exactly what I am explaining:

• You tax liability is first calculated as if you were a resident of Maine for the entire year.   You are then allowed to calculate a nonresident credit on Maine Schedule NR that will reduce your Maine tax by the portion of the tax that is related to the income your earned outside the state while a nonresident.

@khbloomer