What is a State Tax Credit?
Sometimes you have income that may be taxed in more than one state. If you do, you may be eligible for a credit that ensures that income is taxed by only one state. This credit is called a State Tax Credit. It’s also known as an Out of State Tax credit.
The state you live in (your resident state) taxes all of your income, regardless of where you earned it or where the property was located.
However, if you received certain types of income from a state other than your resident state, you may need to file a “nonresident” return in that state.
Here are examples of that type of income from outside of your state:
- Living in one state and working in another
- Owning rental property
- Sale of a home
- Gambling winnings
- Owning or inheriting a business or farm
To claim this credit, in addition to filing your resident return, you’ll also file a nonresident return for the state you received the income from. TurboTax will determine on which state return you’ll get the credit.