Full-time resident of two states?

[Leen1]

@TomD8thank you again for your very quick response.  New York says: "You are entitled to claim this nonrefundable credit for the tax year if ... you had income sourced to and taxed by another state."  That fact that they say "sourced to" makes me worry that they will not give me a credit for the portion of the Washington DC taxes that are on income not sourced to Washington DC.

As I mentioned in my previous most just a few minutes ago, I am hopeful that Washington DC will allow me a credit for the taxes paid to New York on income that is not sourced to Washington DC.

[TomD8]

@Leen1 --

Since you must file as a full-year resident of both NY and DC, ALL your income is taxable by EACH state, regardless of its source.  Thus "sourcing" is irrelevant in a dual resident situation.

Sourcing refers to the common situation where a taxpayer is a resident of one state but has income from another.  For example, a NY resident who works in NJ (but is not a resident of NJ) would have NJ-sourced income.

You can claim an "other state credit" only on your NY return, since NY is your domiciliary state.  This is what the DC tax instructions are telling you.

[Leen1]

Thank you again.  To summarize this thread so far: all my income is taxable in both Washington DC (if I am a statutory resident) and New York (if it is my domicile).  For the portion of my income that is from Washington DC sources, New York will allow a resident credit.  The remainder of my income will be fully taxed in both states, with no compensating out-of-state-taxes credit in either.

If all of that is correct, should I be satisfied with this answer?; is it reasonable according to the standards usually used to evaluate tax policy and laws, or is it effectively a mistake in the tax code logic?  To me it looks like unreasonable, double taxation on the portion of my income that is not from Washington DC sources.

[Leen1]

@TomD8:  I just located Code of the District of Columbia §47–1806.04(a) (at https://code.dccouncil.us/us/dc/council/code/sections/47-1806.04), which appears to be the actual underlying government code determining the out-of-state-taxes-paid credit for Washington DC.

It does not appear to have being domiciled in Washington DC as a prerequisite for taking the tax credit; residency is sufficient.  As such, it appears that I can get a credit for New York taxes paid on New York income. 

If you would sanity check my reading of that code that would be much appreciated! I realize that you cannot make any promises or guarantees about your interpretation, but I would appreciate it nonetheless.

[TomD8]

You are correct that the statute doesn't distinguish between "statutory" and "domiciliary" residents.  However, the current DC tax instructions do appear to do so.

If you decide to claim the credit on your DC return, remember that NY says this:

You cannot claim the credit if:

• you are a resident of New York State and another state or Canadian province for income tax purposes, and
• the other jurisdiction allows a credit against its tax for the total resident tax paid to New York State.

[Leen1]

@TomD8: thank you again.  I think it is key that the passage you underline includes the word "total."  If instead some part of my income is not part of the other state's resident credit then that part of my income is not precluded from being part of a New York resident credit.

If I have that right then for the original problem, the yet unsolved part is what to do with income, such as bank interest, that is not sourced from a particular state.  I am hopeful that that too won't be doubly taxed.