Calculating tax paid as non-resident/part-year in MA on income also taxed by new resident state (VA)

taxnerd

VA offers a credit for taxes paid to another state on income that is also taxed by VA. I earned money this year when I was a resident in MA and have earned money now that I live in VA. Some of my VA income is also taxed by MA and VA wants me to calculate how much tax I paid on only that income so that I can claim a credit. But the MA form for non-resident income is combined with part-year income and computes the tax on all of it together. Even if I remove the part-year income from the return, the non-resident income is still based on calculating fractions of exemptions that are based on all of my income while a non-resident, not just the dual-taxed income.

Has anyone had a credit claim accepted with a calculation this involved? What math did you use to compute the credit amount?

rachels

Hello taxnerd,

If you were taxed by more than one state, you can usually claim the Credit for Taxes Paid to Another State in your resident state. Since you were a part-year resident, you would typically claim that credit in the state you were a resident of during the time you earned the double-taxed income.

The computation can be trickier for part-year residents because, as you said, you need to determine the amount of tax that is a result of only the double-taxed amount shown on your MA tax return. VA's instructions for that credit do not offer specific requirements for how that is to be determined in a situation like yours. Because that is the case, you can generally use any reasonable method to determine the amount of your MA tax liability that is a result of the double-taxed income.

For example, you could do a straight percentage: if 1/4 of your MA income was earned while you were a resident of VA, then you could choose to enter 1/4 of the total MA tax liability as the liability you are claiming for your Virginia Credit for Taxes Paid to Another State.

Whatever method you choose, you may want to keep a personal record of how you determined that specific amount.

You can view the VA instructions for the Credit for Taxes Paid to Another State on pages 34 and 35:

https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2022-760py-instructions.pdf