I work in Delaware & live in PA. My salary is $99,000 & this is the only source of income. Delaware has deducted $4896 as my state tax while as a PA resident, I am only subject to 3.07% state tax ($3039). So should i get full refund of the Delaware state tax & only pay PA state tax OR do i need to do any other calculation?
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Hi,
From everything I'm reading - I won't get a refund from PA for the excess amount paid to DE. But it seems that you stated otherwise. I paid $10,181 in DE and owe approximately $5,400 in PA but Turbo Tax is NOT generating a refund. Am I missing something?
You will need to file a Non-Resident Delaware return and a Resident Pennsylvania return.
The U.S. Supreme Court ruled against double taxation in 2015, stating that two or more states are no longer permitted to tax the same earnings. So, if you live in Pennsylvania but work in Delaware and pay taxes on that income in Delaware, Pennsylvania cannot tax you on it as well. Pennsylvania must offer you a credit for taxes you paid elsewhere.
So you won't pay taxes on the some money twice. You'll have to spend a little more time preparing multiple state returns, however.
Is there any situation that would result in owing in PA and getting a refund from DE? I live in PA all yr and work in DE all yr. 1 job, no other income. It seems to me if DE taxes me at 6.6% and PA at 3.07% that PA should be giving me back money no?
Most likely you will get a refund from Pennsylvania for the excess tax you paid to Delaware.
Prepare your Non-Resident Delaware return first, then your Resident Pennsylvania tax return, which will show that you overpaid tax you owe them on your income (tax paid to Delaware).
Pennsylvania may require a copy of your W-2 and your Delaware tax return to be included with your tax filing to them, which TurboTax will prepare for you.
Click the link for info from the Pennsylvania Dept of Revenue.
Here's more detailed info on filing Non-Resident State Returns to help you.
Sorry, if you live in Pa. full time and work in DE fulltime, the tax situation works as follows: Example - DE will tax your pay
They have 6 tax brackets based on your taxable income, ranging from 2.2 % to 6.6%. Since PA is a flat 3.07 %, you will pay more tax in DE once your bracket is above 3.7%. You will Not be reimbursed by PA for any amount paid in DE that is above what you Would have paid in PA. You will get a credit using the PA tax form for the taxes you paid DE up to the 3.7 %.
Working in DE can be expensive as your salary gets to the 6.6 rate while PA will only credit up to 3.7%. You eat the rest.
Hi,
From everything I'm reading - I won't get a refund from PA for the excess amount paid to DE. But it seems that you stated otherwise. I paid $10,181 in DE and owe approximately $5,400 in PA but Turbo Tax is NOT generating a refund. Am I missing something?
No. You will not get a refund from Delaware. You will file a non-resident income tax form with that state and assuming your withholding was set up correctly, the amount you paid should roughly match up with what your tax liability to DE is. (Any dividends and interests you have will be associated with your state of residence, i.e. PA, and wouldn't really affect your DE tax liability.) Besides filing a non-resident DE state tax return, you will also need to file a PA state tax return and during which, you will get a credit for the taxes you paid to Delaware. That is the simple answer.
Here is one complication though. Even though Delaware's tax rates are generally higher than PA's state tax rate of 3.07%, you may still owe some taxes to PA if you had a contribution to an employer 401(k). This is because Delaware follows federal law and excludes any pre-tax contributions from their definition of income, whereas the state of PA defines income comprehensively and includes all amount paid by your employer as taxable compensation, even if some of it was contributed to a 401(k). To give an example, say your DE taxable income is $100,000 and you contributed $10,000 to your 401(k). With those numbers, your DE tax liability is say, around $5500 and your PA tax liability on $100,000 income is $3070. You would get a credit of $3070 and not have to pay any PA tax on the $100,000 that DE has taxed. However, you would still owe 3.07% X $10,000 or $307 to PA because that $10,000 of 401(k) income was never taxed by DE but it is considered taxable income by PA. If you did not have any such 401(k) contributions, then this discussion does not apply to you.
Is there any way around this?
Yes @Esham the way around not having to pay Delaware tax is to work from home in Pennsylvania. Otherwise you are liable for Delaware for days worked in DE.
Pennsylvania residents are taxed on income earned everywhere so DE income is taxable to PA. As esteemed community member @sutirthabagchi explained in their response.
I’ve thought of that. I don’t mind paying Delaware (and technically I have an office in Delaware), but I’m annoyed that the pa tax return is only recognizing 3.07% on my Delaware earnings (without 401k) for state reciprocity, so I end up owing money in pa when I really paid 6%ish in Delaware….trying to figure out if I just messed up my return.
States will only give up credit up to the amount of tax you would have paid if the income was earned in the state. You often end up owing Pennsylvania if you work in Delaware or New York or even New Jersey.
If states give you credit for more than you state tax rate, the excess would reduce tax on the rest of your in-state income which would not be correct.
I know this post is from 2020 but this is exactly my situation! Which Turbo Tax product will I need to be sure to have all the forms I need to file as you indicated? Also, I have used HR Block for 10 plus years so are my last years HR block files importable to your software?
All TurboTax products can handle multiple state returns. Your choice depends on the types of income you have besides wages, such as self-employment, investment income, or rental property.
If you use TurboTax online, you can start with the Free version. TurboTax will ask you to upgrade to a higher version if needed.
If you prefer CD/Download, click on the tiles at Which TurboTax CD/Download product is right for you?
You can import a PDF copy of your H&R Block return into TurboTax. Be aware, not all your data may transfer so be sure to check each screen with imported info for accuracy.
How do I transfer last year's return into TurboTax Online?
Can I transfer last year's PDF to 2022 TurboTax for Mac?
Can I transfer last year's PDF into the 2022 TurboTax for Windows CD/Download software?
@mgurczynski
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