Turbo tax is showing a credit on Arizona Part Year Resident return for taxes paid to California. That seems the opposite of how it is supposed to work.

[dzlotnik]

I'm preparing my parents return. They moved from CA to AZ in August 2018. According to instructions, AZ should show tax on income earned while resident in AZ. CA taxes all income and allows credit for taxes paid to AZ.  Turbo Tax is showing a credit for taxes paid to CA.  That seems wrong. No AZ taxes withheld or paid yet for 2018.

[maglib]

they are part year residents of 2 states based on what you said, during the interview you will allocate income earned to the resident state.  Part-year residents of California - Taxed on all income received while a resident and only on income from California sources while a nonresident.  Were they still earning income from CA sources while residents of AZ?  There is a lot of nuances and you need to make sure you go through the interview correctly.  If at any point they were non-residents earning income, that return must be completed prior to the resident return.

[dzlotnik]

Thank you for your response. Their income all comes from 1099-R's, pension income, they are retired.

[maglib]

Pension income is not taxable once you leave the state and take residency elsewhere.  There should be no credit for double taxed income by another state then. Be careful in the interview.  Basically they are part year residents of 2 states and only the portion of the pension earned while living in the state is taxable to that state.  Do not answer the question did you earn income in another state while a resident as you did not.

[TerryA · Accepted solution]

Based on your response to maglib's questions they never had income from other state sources, whether living in CA or AZ so there can be no credit for taxes paid to other states.

Go back though the Personal Info section and make sure that you haven't indicated that they "made money in other states" because that tells TurboTax to attempt to prepare that credit.