I made income in 2 states. Why am I being taxed on my total income by the state that I made only about 15% of my income from?

[elyse12a]

I made $6,800 in New York state and the balance, about $33,000, in MA.  I'm currently doing my state taxes and it looks like NY is taxing me on my TOTAL income of about $40,000 (less the standard deduction), instead of only the $6,800 that I earned in NY.  I haven't gotten to the MA state tax form yet.  Is this correct?

[AnnetteB6]

Most likely it is correct. 

Each state has a different method of reporting income and determining what is taxable in that state.  The New York state return does use the total amount of income reported on your Federal return as part of the calculation to determine the amount of New York taxable income.  The New York taxes should be prorated based on the income earned in New York or income earned while a New York resident to the total income on the Federal return.

If you are filing a resident and non-resident return, be sure to complete your non-resident return first.  If you are filing two part-year resident returns, pay close attention to the income allocated to each state.

[elyse12a]

I don't see where NY is prorating my income.  NY seems to be taxing me on my entire income, rather than the roughly $6,800 that I made while working in NY.  I earned the balance of my income (roughly $33,000) in MA.  How can it be right that NY is taxing me on my entire income, most of which I made in my current state of residency (MA)?  Shouldn't NY only tax me on the income that I made while living and working there?  I moved to MA on 5/1/2021, so I lived and worked in MA for 2/3 of the year.

[LenaH]

You will see New York prorating your taxes on the Let's Review Your New York Numbers screen at the end of your New York return. At first, it may appear as if New York taxes all your income, but you can rest assured that they don’t. New York State uses the New York Income Factor when determining your tax amount. Their state return starts with all your taxable income and taxes it at the applicable New York State rate based on your total income. Then, the state uses your New York sourced income (the amount you allocated) to determine your New York Income Factor, which is what percentage of your income was earned in NYS. Lastly, they multiply your total tax by the New York Income Factor to determine your NYS tax. You will see this towards the bottom of the screen, under the header Taxes. 

@elyse12a

[elyse12a]

Now it's asking me "Pay Tax to Another State?   You may qualify for a Massachusetts credit if you paid income tax on income that was earned in, and taxed by, both Massachusetts and another state (in this case, NY)."  Do I enter "yes" or "no" here?  If yes, it then asks "Income taxed by another state."  Enter the total 5% income.....etc."  Am I supposed to fill this in with data from the job that I worked while living and working in NY?  Or, am I being asked something else? I'm confused........I've already entered the Ny job tax information.

[ErnieS0]

Yes. Massachusetts gives you a credit for tax paid to another state. In your case, this is the money you made in New York. Massachusetts considers wages to be "5% income".

Enter your NY wages and NY tax liability for claim the credit. You can find the info on the NY Tax Summary. If TurboTax filled in the numbers, use the TurboTax numbers. Otherwise:

1. Tap Tax Tools in the left column
2. Then Tools
3. Than NY Tax Summary
4. Select Back when you are finished