Non-Resident New York tax calculation based on Federal AGI?

[GGGGary554]

I live full time in PA.  In 2021 I sold property in New York State.  At closing I was required to pay the NYS 10.9% capital gains tax.  When I filled out the Federal return I declared the land sale, and there was a field for "State Tax Withheld", where I entered the capital gains tax I paid.  All seemed fine.  Then got to the New York non-resident return.  Went through the whole interview with no issues.  Got to the end and I don't understand what TurboTax is doing.  What seems to be happening is TurboTax is calculating my NYS tax due based on my Federal AGI.  It then multiplies that amount by a "New York Income Factor", which is basically a ration of New York capital gains divided by my Federal AGI.  In the end it's telling me I'm due back about 1/2 of the capital gains tax I paid (which is a good thing); I just don't understand why it's calculating it the way it is.  I've gone over the NY IT-203 form multiple times, and can't make sense of it.  The only entry in the NY column is the capital gains on the land I sold.  Can anyone shed some light on this

[DianeW777]

Yes.  Each state handles their nonresident tax in their own way.  Sometimes it calculates the tax on just the income from that state and other times the state will take the specific state income divided by the total federal income (usually the AGI).  The tax is calculated first on the entire amount of income then the ratio that was determined will be multiplied by the tax to arrive at the tax for the nonresident income tax return.

In New York (NY) they are calculating the federal AGI, adjusted for NY differences, then calculating the tax as if it were a full year. After this they take the NY income and divide it by the total income to arrive at the percentage to multiply times the tax.  This amount will be the tax liability on the NY return.

The income attributable to NY and the tax charged by NY (not withholding), will be used on the PA return to receive a credit for taxes paid to another state on the same income.

The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income.  As the resident state all worldwide income must be included.

The credit for tax paid to another state on the same income will be the lesser of:

1. the tax liability actually charged by the nonresident state, OR
2. the tax liability that would have been charged by your resident state

[GGGGary554]

So you're saying that the capital gains tax I paid at closing was, by New York's method of calculating tax due, an overpayment, and I'm due a refund of a portion of it?

That's the sticking point with me.  I calculated (using New York's formula) and paid the capital gain tax at the close of the land sale, and now it's looking like I didn't owe as much as they said I did.

Thanks

[richpatrie]

Correct. The 10.9% tax at closing is an "estimated" tax.