Worked remotely from Idaho for California then New York, then moved to New York. Do we get double-taxed, or how should we claim credit for taxes paid to the other state?

[pievibrant]

We started last year in Idaho, then moved to New York partway through the year. While in Idaho, we earned W2 income working remotely for a company in California, then switched to working remotely for a company in New York. The majority of our income for the year was earned while living in Idaho and working for the New York-based company.

Now while filling out part-year resident tax returns for both states (ID and NY), we find that Idaho just wants to tax what we earned while in the state, while New York wants to tax everything we earned from New York sources. There is a large overlap between those two, but we're having trouble understanding if we can take a credit in either state for the double-taxed income.

NY says "You may not claim a credit for tax paid to the other taxing authority on any amount of income, gain, loss, or deduction arising from interest or dividends from intangible assets unless it is received from an asset connected with a trade or business conducted in the other taxing authority." (IT-112-R-I) Does that mean we can't claim credit for any of the double-taxed work we did while living in Idaho, since it was earned remotely from businesses located outside Idaho? Or is living in ID good enough to "connect" all our work to that state?

ID says we can take a credit "for the amount of any income tax imposed on the individual [...] by another state on income derived from sources therein while domiciled in Idaho" (Idaho Code 63-3029). Does that mean we can claim credit for the double-taxed NY income since it came from a NY office? Or does "derived from sources therein" have some other technical meaning?

In short: Are we allowed to take a credit, for either ID or NY, for taxes paid in the other state?

Thank you in advance!

[DanielV01 · Accepted solution]

For your situation, you will claim the credit on your Idaho return.  While living in Idaho, your remote New York income was subject to convenience since you were in the process of establishing yourself as a regular worker in New York for that company.  All of that income is first taxed in New York (the source of the income), and then you may claim a credit for the taxes you pay on the "double-taxed" income (common to both New York and Idaho) on your Idaho return.