Live in PA work in DE Question

[eweisenberg]

I ive in PA and work in DE.  I have already filled in my DE return.  When I complete my PA return, should I include my DE income as taxable for PA or not.  I currently have it excluded from my PA taxable income and I have also filled in the G/L form to get a PA state tax credit for a portion of tax I paid to DE.  Is that correct?

[ErnieS0]

No, include all income on your Pennsylvania return. PA residents are taxed on income earned everywhere.

You can claim a credit on Schedule G/L for tax paid to Delaware.

Delaware’s tax rate in generally higher than PA’s flat rate of 3.07% so you should not pay any tax on your DE income due to the tax credit.

[eweisenberg]

Hi - Thanks for your reply.  To clarify, I followed the instructions below that I found on a turbotax response to a similar question for living in PA and working in NY.  My question is whether Step 5 below is incorrect as the income should be considered taxable to PA.  

If you live in Pennsylvania and work in New York

1. Sign in to your TurboTax account and open (continue) your return
2. Select State from the left menu
3. Select start next to your Pennsylvania resident return
4. Follow the on-screen instructions until you reach the screen Compensation Summary. Pennsylvania and New York should be listed as separate entries
5. Select Edit next to the entry for New York and check the box next to next to Entire amount of this income is not taxable to PA, then Continue
6. If everything looks correct, select Done
7. Follow the on-screen instructions until you reach the screen Taxes paid to other state(s) summary. New York should be listed
8. Select Edit next to New York, then Continue. In the New York column, you should see the New York compensation amount and income tax due 
9. Enter the same amounts in the second column, if they’re not already present (Note: The second column represents the amount that will also be taxed by the state of Pennsylvania) and Continue
10. The next screen will show your Pennsylvania credit for tax paid to New York. Continue and complete the remainder of your Pennsylvania return

[DMarkM1]

Yes, you are correct if you lived in PA the entire year and worked in NY then step 5 would not apply. The income is taxable to PA as a PA resident.  For that reason you would be claiming the credit for taxes paid to another state to mitigate the double taxation.  

Step 5 would apply if one moved into/out of PA then the income might not have been taxable to PA.