We're NJ residents, and all our earned income is from Philadelphia. NJ gives a credit for tax paid to Philadelphia; Turbotax first tells me it's $2,857 but then $2,447.

[papalovesmambo]

On one screen I enter the double-taxed income information; how much I earned and how much I paid to Philadelphia.  In the next screen it says, Congratulations your credit is $2,857.  In the screen following that, it summarizes that my tax owed to NJ is $2786 and my credit for taxes paid to other jurisdictions is $2,447.  Why did the credit go down??

[SweetieJean · Accepted solution]

The credit a taxpayer is allowed is limited to the lesser of the proportional credit limitation amount, or the actual tax paid to the other jurisdiction.

The “proportional credit limitation amount” represents the amount of New Jersey income tax that would have been imposed if the income earned in the other jurisdiction (Philadelphia) had been earned in New Jersey.  In general, if the other jurisdiction’s effective tax rate is higher than New Jersey’s, the credit will be limited to the proportional credit limitation amount.

http://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git3w.pdf