I live in PA but work in DE. My employer withheld DE state income tax, but there is nowhere to input that into my DE return--it's saying I still owe DE state income tax.

[Fern · Accepted solution]

The input of state income taxes withheld is done in the W-2 section under Federal Taxes - Wages and Income.

• Select Federal Taxes
• Select Wages and Income
• Select Start at Form W-2

State information is included in boxes 15 - 17.

You will file a non-resident DE state tax return and a resident PA state tax return.  You should allocate your income on the DE tax return so that your wages is the only income there. The taxes withheld for DE should be refunded to you as PA and DE have a tax reciprocity agreement.

Going forward, work with your employer so that only PA tax is withheld from your paycheck. You need to fill out a  Delaware (Form 200-02).

[re2boys]

PA and DE do not have tax reciprocity agreement.  Poster will need to file DE nonresident return and pay taxes on DE income.  Then file a PA resident return reporting all income.  Be sure the PA return contains a Schedule G whereby your are given credit for taxes paid to another state, in this case DE.

[xdelmarvamac]

I do NOT think PA & DE are reciprocal states; therefore, if a resident of PA, income need to be reported both on DE &  PA  tax returns. Allocation of income and credit for taxes paid is something I don't yet understand . 

[KrisD15]

In TurboTax always enter the non-resident state first. 

Allocate the income which "belongs" to that state, such as only what you earned there if you only worked there. 

Usually the resident state will tax your full income, but then credit you for the amount of tax you paid to the first state so that you are not double-taxed on your income. 

[cnc611]

Would you also be able to take a credit on your DE return for taxes paid to PA?

[AnnetteB6]

Without knowing more about your specific tax situation, your question cannot be answered with certainty.  But, here is some general information to know about filing taxes for two states.

If you lived in one state and moved to another during the year, then you would file a part-year resident return for each state.  The income taxed by each state would be allocated between the two according to the situation.  There would be no credit for taxes paid to another state in that case because each state would only be taxing the income they are supposed to tax.

If you lived in one state and worked in another state, then the income that you earned in the non-resident state may be taxed by both the state where you worked and your resident state.  This is where the credit for taxes paid to another state comes into account.  Your resident state return would allow you to claim a credit for the taxes you had to pay to the non-resident state based on the income that was earned there.  That would help to reduce the double-tax situation for your earnings.

In general, when you have this situation, complete your non-resident return first and TurboTax will pick up information from that return to help you complete the 'credit for taxes paid to another state' section.

@cnc611 

[cnc611]

Thank you. I understand I would pick up the taxes paid to the non-resident state (DE) as a credit for taxes paid to another state on the resident state return (PA). But the non-resident return (DE) also has a section where a non-resident can take a credit for taxes paid to another state, so I’m wondering if I could take a credit for taxes paid to PA there. 

[MayaD]

No. You generally cannot take the credit for taxes paid to another state on the nonresident return.

The credit for taxes paid to another state is available so that you don't pay taxes to multiple states on the same income. 

DE nonresident return calculates your tax based only on the income that was earned in DE (unlike PA resident returns, where your tax is generally based on all of your income, regardless where it was earned).