What does the term “Conformity Subtraction” refer to in the list of income and deduction amounts to be allocated in a state return for a part year resident?

[GaryS]

I moved from VA to MA during 2024 and, for my VA state return, TurboTax is asking me to allocate various Federal income and deduction amounts to VA, one of which is designated as the “Conformity Subtraction”. I don’t know what that reference is to or where TurboTax generated that amount from, so I don’t know what methodology I should use to determine the portion to be allocated to VA.

[JohnB5677]

Virginia law exempts certain types of income that may have been reported in FAGI. 

An example is allowed for individuals who receive distributions from retirement plans. 

The subtraction can be taken only if the individual was taxed on contributions originally made to the retirement plan in another state that were deductible from federal adjusted gross income during the same period.

Virginia Tax Subtractions

[GaryS]

Thank you.  Is there any way to determine the source or makeup of the amount that TurboTax has calculated and designated as the "Conformity Subtraction" amount?  I do not recognize the amount listed from any of my income or deduction entries, so I'm not sure whether it's from a single source or multiple sources.

Without knowing the source of the amount they've listed, I'm not sure how to determine the portion that should be allocated to VA.  For other amounts to be allocated, it's more clear how to determine the portion to be allocated to VA based on the state I was residing in when the income amounts were received or the deduction amounts were incurred.

[AmyC]

We can do data sourcing with the desktop version. If you give us the worksheet and line number causing trouble, we should be able to help figure that out.

Be sure you are looking at all your worksheets, not just the forms.

To print or view  your forms:

• In desktop, switch to Forms Mode. 
• For online:
  1. On the left side, select  Tax Tools
  2. Select Print center
  3. Select Print, save or preview this year's return, select all worksheets with your tax return
  4. If you have not paid, select pay now.

[GaryS]

Thank you.  I am using the desktop version and, when I go to Forms view and look for this item, it appears to be Line 29 ("Conformity Subtraction") of Form 760PY.  TurboTax auto-populated an amount in that line under the "Income From Federal Return" column and is looking for me to populate the amount for that line item under the "Income While Virginia Resident" column. 

I don't see anywhere on that worksheet to do data sourcing on the amount in the "Income From Federal Return" column that TurboTax auto-populated that would enable me to determine what portion to allocate to VA in the "Income While Virginia Resident" column.

[KeshaH]

Since you're using the desktop version, you can right click on the amount in question and choose Data Source from the menu. You'll see a pop-up that tells you exactly where the amount on that line comes from.

@GaryS 

[GaryS]

Thank you Kesha. 

Your suggestion did bring me to the source data for that TurboTax-generated Conformity Subtraction amount.  Apparently, it comes from the sale of a business property (a rental unit) that was located in VA.  The closing date for that sale, which is the date on which I received the proceeds of that sale, was after I had moved out of VA and was residing in MA. 

So, on my VA state return, when TurboTax asks me to designate the portions of various income and deduction amounts that should be allocated to VA, I'm not sure if I should be allocating all, some or none of that Conformity Subtraction amount to VA given that property was located in VA but was sold while I was residing in MA. 

Any thoughts on how I should respond to that VA allocation question given those facts?

[DianeW777]

Property sold that was located in Virginia (VA) is fully taxable to VA. Since you were living Massachusetts (MA), it will also be taxed there.

Your resident state of MA will give you a credit for tax paid to another state on the same income. Since they are both part year resident state returns, be sure to have the amount of income and tax that is included on both state returns.

• Take the income taxed from the property sale and divide it by total income taxed on the VA return. Next take that percentage and multiply it by the total tax liability on the VA return. This will be the tax portion paid to VA on that income. Be prepared in the MA return to enter this credit.

State Returns - Your resident state requires you to include all worldwide income. Assume both states require income tax returns to be filed: 

1. Report the income on each state return that is from the nonresident state
2. Report it on your resident state and receive credit for taxes paid to another state.

Credit for taxes paid to another state is allowed by a resident state when the same income is being taxed to another state.  Your resident state does not want you to pay tax twice on the same income. The credit that is allowed 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

@GaryS