What do I do for "Itemized deductions-Reduction to State Income Tax"? It says Delaware allows a deduction for state income taxes but what does this mean?

[tthompson1]

It says that I can enter the portion of your out of state tax credit that was paid during 2022 but what does that mean? I work in MD and live in DE. It gives me an "out of state tax credit" amount and then asks me to enter the portion of that amount that was paid during 2022? What does that mean?

[KrisD15]

To clarify, for Tax Year 2021, did you file a MD and DE return? 

Did you get a state refund from either state (which means you would have gotten the 2021 state refunds paid in 2022)?

[tthompson1]

I filed a MD non resident and a DE resident in 2021 and I got a small MD refund but nothing from DE

[LindaS5247]

This credit allows you to avoid paying taxes to Delaware for income that was already taxed by another state. 

For example, if you filed a nonresident return reporting taxes owed to Maryland for income that you also have to report on your Delaware return, your Delaware taxes owed can likely be reduced.

You should be filing a non-resident tax return for Maryland and prepare that first.  Then prepare your Delaware (Resident Return).  The information should flow through to your Delaware return from your Maryland return.

However, the percentage would be your taxable income derived from Maryland divided by your entire Taxable income.

From Revenue Delaware: Other Taxes--Credit for Taxes Paid Another State

Residents and part-year residents may claim a credit against the Delaware personal income tax for income taxes paid to another state or the District of Columbia on income derived from such sources which is also subject to Delaware personal income tax. ( Instructions, Form 200-01, Delaware Individual Resident Income Tax Return; Instructions, Form 200-02, Delaware Individual Nonresident Income Tax Return) The credit may not exceed the amount computed by multiplying the Delaware personal income tax due by a fraction, the numerator of which is the amount of the taxpayer's taxable income derived from sources in the other taxing jurisdiction, and the denominator of which is the taxpayer's entire taxable income. 

 Click here for an FAQ on Delaware's personal income tax rules.

Click here for information regarding when you would have to file a nonresident tax return.

Additional information on how to file a nonresident tax return can be found here.