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Not Allowing for Other State Tax Credit

(CA State Tax) In "Other State Tax Credit" section, why does TT say "California residents cannot claim this credit if it's tax you paid to AZ" when CA and AZ have reciprocal agreement? I live in CA and work for a AZ company which has withheld state taxes. Filed non-resident AZ first and then CA and expected credit for the taxes paid to AZ but did not see it. Looked at the Other State Tax Credit section and received the above message.

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ErnieS0
Expert Alumni

Not Allowing for Other State Tax Credit

California and Arizona are backwards. California residents claim the credit for double-taxed income on the nonresident Arizona tax return.

 

A credit against Arizona income taxes is allowed for Arizona nonresidents who are not allowed a credit by their state or country of residence for taxes paid to Arizona if either:

• The other state or country does not tax Arizona residents on income derived from sources within the other state or country.

• The other state or country allows Arizona residents credit for taxes paid on income subject to tax by the other state or country and Arizona.

 

Arizona nonresidents who file resident returns with the following states qualify for the credit.

 

California, Indiana, Oregon, and Virginia

 

Form 309 Instructions

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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2 Replies
ErnieS0
Expert Alumni

Not Allowing for Other State Tax Credit

California and Arizona are backwards. California residents claim the credit for double-taxed income on the nonresident Arizona tax return.

 

A credit against Arizona income taxes is allowed for Arizona nonresidents who are not allowed a credit by their state or country of residence for taxes paid to Arizona if either:

• The other state or country does not tax Arizona residents on income derived from sources within the other state or country.

• The other state or country allows Arizona residents credit for taxes paid on income subject to tax by the other state or country and Arizona.

 

Arizona nonresidents who file resident returns with the following states qualify for the credit.

 

California, Indiana, Oregon, and Virginia

 

Form 309 Instructions

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Not Allowing for Other State Tax Credit

Thanks. Independently found this out as well. Bottom line: CA taxes all "global" income and does not accept credit for taxes paid into another state. So, one needs to look at the state return where you paid those taxes. Fortunately, for me, AZ does allow for credit for taxes paid to CA . As you point out, use form 309 in the AZ non-resident return. In TurboTax, you have to complete the CA return first to determine the amount of credit to apply in AZ return. The AZ return does ask you questions to guide you, but is easy to overlook. You can always open up form 309 and fill out manually (and verify it is filled out correctly if you used the "interview" process).

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