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