We are NY residents. My wife recently came into some rental property in Iowa. The rental income is subject to IA tax. NY provides a credit for this tax, via form it-112. Roughly, this appears to ...
- total your 'other-state' income,
- compute that as a fraction of your total (it-201) taxable income,
- multiply your NY tax by that fraction
- ... which number then caps the amount of credit you can take for the other-state tax.
So, if your other-state taxable income is 1/2 of your total it-201 taxable income, the max credit is 1/2 of the NYS tax.
Which is clear enough. My question is, what to count as 'other-state' income? Per the it-112 instructions, ... " Enter in column B of Form IT-112-R the gross income from column A [NY income] that was taxed by the other taxing authority ..."
Which sort of sounds like, column B would be just the 'other-state'-source income. (In our case, the IA rent.)
But, for non-residents, Iowa requires that you file a regular ia-1040 that includes ALL your income, regardless of state. They compute the IA tax on this, but then apply a 'non-resident credit' (per ia-126). That seems like ALL our income is subject to IA tax, and the NY it-112 'other-state' income (column B) items would include ALL our income, not just that from IA sources.
So: should our it-112 'other-state' income (column B) use just our IA-source income, or should it come from our IA return, which include non-IA-source income?
Thank you, George