Hello,
Pl. clarify the following. I am using some numbers to illustrate the problem, not that they are real numbers, nor need to apply any tax brackets etc. But I want to understand the generic priniciple. Pl. consider this scenario.
- I live and file taxes in Arizona. And state tax % is approxmately is, say 5%. Most of my income is Arizona income, say it is 300K
- However I have an additional income from California also, and the income say $200,000. CA tax % is say 10%
So total income is 500K. With this situation, when I need to pay taxes ...
- Do I end up paying 5% of the CA income of 200K besides 5% of AZ income of 300K to AZ?
- And also another10% of the CA income 200K to CA as well?
OR
- Will I be paying only 5% of AZ income of 300K to AZ
- And 10% CA income of 200K to CA
Pl. help understand how this works.
regards
Basic
All states have different laws, and different types of income is taxed differently,
but for simplicity
If you are a resident of Arizona and a NON-resident of California,
you will pay the 10% California tax on the California income
You will pay 5% Arizona tax on ALL your income HOWEVER Arizona will give you a credit for the tax you paid on the 200,000 to California HOWEVER Arizona will calculate that credit on their 5% tax rate, not California's 10% tax rate.
So if you paid CA 20,000 on 200,000
You will pay AZ 25,000 on 500,000 and get a credit of 10,000 for the 200,000 for a total AZ tax of 15,000.
So total tax for both states, 35,000
(Has it all been CA, tax would be 50,000)
(Had it all been AZ, tax would be 25,000)
All states have different laws, and different types of income is taxed differently,
but for simplicity
If you are a resident of Arizona and a NON-resident of California,
you will pay the 10% California tax on the California income
You will pay 5% Arizona tax on ALL your income HOWEVER Arizona will give you a credit for the tax you paid on the 200,000 to California HOWEVER Arizona will calculate that credit on their 5% tax rate, not California's 10% tax rate.
So if you paid CA 20,000 on 200,000
You will pay AZ 25,000 on 500,000 and get a credit of 10,000 for the 200,000 for a total AZ tax of 15,000.
So total tax for both states, 35,000
(Has it all been CA, tax would be 50,000)
(Had it all been AZ, tax would be 25,000)