My child (CA resident) has investment income from K-1s in OR. They are getting taxed in OR and CA on the same amount. Is this double-taxation par for the course with OR?

[EricBBL]

The TurboTax form says "Schedule S (OR) - California Residents cannot claim state tax credit paid to this state.

[Hal_Al]

What is the nature of the investment income? Normally investment income (interest, dividends and capital gains) are not taxed by a non resident state. But if the income is rent, royalties  or compensation (Oregon source income) it would be taxable.

[EricBBL]

In this case, it is OR real estate rental income on their K-1. So they are paying OR income tax on that and it seems that they are having to pay CA taxes on that same income. How do I work out the"contrary" rule so they don't get double taxed? Thanks

[Hal_Al]

I'm not personally familiar with OR (or CA) software; but, basically, you will encounter a section of the state interview (OR in your case)  that asks if any of the income is subject to tax by another state.

[Anonymous]

California residents who are included in a

group nonresident tax return similar to the

tax return described in California Revenue &

Taxation Code (R&TC) Section 18535, filed

with the states listed in this section, as well

as Arizona (AZ), Oregon (OR), or Virginia (VA)

may also claim a credit for their share of

income taxes paid to these states, unless any

of these states allow a credit for taxes paid to

California on the group nonresident tax return.

Attach a statement and schedule showing

your share of the net income tax paid to the

other state.

[Hal_Al]

In other words, CA & OR are "contrary" (to the standard rule) or "reverse" states. You claim the credit on the non-resident ( OR) return, not the resident (CA) return.

[EricBBL]

Thanks for your help.  It looks like it needed to do the CA first then the OR.  When I went back in, the OR saw the CA taxes and made the adjustment.  

[EricBBL]

The investment income is rental income.  

Thanks for your help.  It looks like it needed to do the CA first then the OR.  When I went back in, the OR saw the CA taxes and made the adjustment.