Nonresident State Tax Credit Does Not Display in Resident State Return
If you need to prepare more than one state return, you may notice that your resident state return isn't giving you a credit for the taxes you paid to the nonresident state(s).
Explanation and Solution
The state where you live (resident state) will tax all your income and will give a credit for taxes paid to the non-resident state on the resident state return so you are not double taxed.
In order to receive a non-resident state tax credit follow these steps:
- Enter your non-resident state information first.
- Enter your resident state information next.
- Make sure you choose the resident state long form even if the short form EZ is automatically chosen for you.
- On your resident return "Other State Taxes Summary" your state credit will come up.
If you created your resident state return before you began work on your nonresident state return, TurboTax will not pull over any tax amounts (credits) from your nonexistent nonresident state return.
To resolve this issue, you will need to remove your resident state return and then create a new resident state return. (Doing this has the same effect as entering your non-resident state first, which is how the returns should be entered.)
How do I choose the resident state long form if the short form EZ is automatically chosen for me?
If you have not selected the resident state long form option, the non-resident state tax credit may not calculate.
Follow these instruction to choose the resident state long form:
- On the "Here's What We Know" screen of the resident state return you will see "How Would You Like to Continue?"
- Select "I'd Like To See if the Long Form Is Right For Me?"
- On the "Do These Apply to You?" screen, select "I paid income taxes to another state" and "I have a more involved state tax situation and I'd like to file using the long form."
How are the resident and non-resident incomes allocated?
Depending on your state, resident and non-resident incomes may be allocated automatically according to your Wage & Income entries on your federal return.
In some cases, TurboTax will prompt you to allocate income between your resident and non-resident state.