I need help with Form 309 (California). It's asking me to fill in "Inc subj to tax by oth st" but I can't find that line / don't know what to out.

[Acolli07]

I am filing in AZ for the first time. But also filing in CA.

[TomD8]

In which of the states do you live?  Did you move during 2020?

[DanielV01 · Accepted solution]

Is your home state California or Arizona?  If it is California, you will not need Form 309.  The reason is because California and Arizona have a reverse credit agreement.  Normally when you live in one state and work in another, both states are allowed to tax you.  However, your resident state will allow you to claim a credit for the tax you must pay to the nonresident state for the income you earn working there, to reduce the effects of double-taxation.  

With the reverse-credit agreement, the credit works in reverse:  your nonresident state will give you a credit for the tax you pay to the resident state for any income you are earning in the nonresident state.  If, therefore, you live in California, but work in Arizona, then you do not claim a credit on the California return.  Rather, you will claim it on the Arizona return.  

Of course, if you are living in Arizona, and working in California, then you will claim the credit using Form 309.  In this case, the income that is subject to tax in the other state is the income you earned in California, because all of that income will be taxed in Arizona.  And the amount of Arizona tax will be the amount of AZ tax that was withheld, plus any additional tax you must pay in or minus any refund you will receive.  If you are claiming the credit on the Arizona return, the math is the same, but just switch out California for Arizona and vice-versa.

Feel free to post additional questions if you need further clarification.

[Acolli07]

Thanks Daniel!
Form 309 was added to my taxes by Turbo tax - how do I remove it?

[Silveradosue]

I live in AZ but sold a house in CA. I paid CA state taxes on the sale of the home. I want to add the AZ 309 form to show that I already paid tax in my capital gain from CA.

[DanielV01]

@Silveradosue  If you paid Capital Gains Tax to California as an Arizona resident, then you actually have the situation backwards.  You do not file Arizona 309 for a credit for taxes paid to California.  Rather, all of your income is taxed in Arizona, and, because of the reverse credit agreement between California and Arizona, you claim a credit for Arizona taxes you pay on this income on your California return.  You will likely get a California refund because of this (but your Arizona return will have extra taxes on it).

[cminor50]

Hi! I am a college student so I worked in CA over the summer but in school at ASU so I also have an on campus job in AZ. I am a non resident in AZ but a CA resident, what should I put for my 309 form (california) as it is asking me inc subj to tax. Thank you and let me know. 

[Cynthiad66]

Per our Tax Expert, @DanielV01, if it is California that is your home state, you will not need Form 309.  The reason is because California and Arizona have a reverse credit agreement.  Normally when you live in one state and work in another, both states are allowed to tax you.  However, your resident state will allow you to claim a credit for the tax you must pay to the nonresident state for the income you earn working there, to reduce the effects of double-taxation.  

1. If you worked in one state and lived in another, you will need to file a Non-resident return for the state where you worked and a Resident return for the state where you live.
2. Don't worry - you'll only pay taxes on your state earnings to one state.

However, if the situation is reversed where your resident state is Arizona and you work in California, you will need the Form 309 for AZ to report CA income.

@cminor50

[Chinuk]

If I do not need it but Turbo Tax has added it. Now how should I remove it?

[Chinuk]

Same question here!

[MayaD]

Taxpayers use Arizona Form 309 to figure their credit for taxes paid to Arizona and another state or country on the same income. 

If that doesn't apply to you, follow the steps below to delete the form:

1. Sign in to TurboTax and open your return by selecting Continue or Pick up where you left off
2. In the left menu, select Tax Tools and then Tools
3. In the pop-up window Tool Center, choose Delete a form
4. Select Delete next to the form, schedule, and worksheet in the list and follow the instructions

[juli0c]

TurboTax 2023 won't allow me to skip this. It marks it as an error.

My situation as well, I'm resident of California with a small revenue in Arizona, filing for the first time.

What number do I put in? Zero?

[MonikaK1]

If you are a California resident, be sure to complete the nonresident (Arizona) return first, if required, then your resident California return. California will tax you on income from all states. 

You would use Arizona Form 309 if you were an Arizona resident to figure your credit for taxes paid to Arizona and another state or country on the same income. As a California resident, Form 309 doesn't apply to you.

If you did California first and then Arizona, delete both of the state returns and enter them again, Arizona first.

See this help article for more information about filing if you have income from multiple states.

[TomD8]

@MonikaK1   wrote:  "As a California resident, Form 309 doesn't apply to you."

Actually, the instructions for the 2023 AZ Form 309 assume that non-residents of AZ who qualify to claim the credit WILL be completing AZ Form 309.  Because of the reverse-credit arrangement between the two states. residents of CA do qualify for the credit.

See "Worksheet for AZ Non-residents" on page 5 of Form 309 instructions.

 https://azdor.gov/sites/default/files/2023-03/FORMS_CREDIT_2020_309i.pdf

Why would there be a worksheet for non-residents if Form 309 only applies to AZ residents?

Also, in order for TT to correctly claim the credit on the non-resident AZ return, I believe the taxpayer must complete the CA resident return before doing the non-resident AZ return - which of course is the reverse of the usual procedure.