Question on CA resident with income from states
What are the rules for a California Resident (for Tax purposes) with income from other states?
If one has income from Florida...does one have to pay California State Income taxes on the Florida income?
Please let me know.
Thanks Irfan Smith
If you're a California resident, you pay California income tax on all of your income.
If you also paid tax in the other state, you can credit that tax toward your California tax on state Schedule S.
To be more precise,
1) your California resident tax calculation begins with your federal AGI, which should include all your world-wide income, adjusted as allowed by federal tax law. For tax purposes, FL is still considered part of the world, so all FL income is included.2) you make adjustments for CA tax law that does not conform to federal, for example CA does not tax unemployment compensation or social security benefits, and CA does tax state or municipal bond interest that is not from CA. This gives your CA AGI amount.
3) You calculate CA tax after taking into account CA standard or itemized deduction, and various credits such as the personal exemption credit.4) If you have double-taxed income as a result of another state also taxing your source income from that state (i.e. you are required to file a non-resident return for that state), in most cases CA Schedule S can be used to get a credit for the lesser of CA or other state tax on that double-taxed income. In other cases, you must look to the non-resident state to give you a credit, if any.
To your question, since FL does not have a state income tax, there will be no double-taxed income, so you stop after step (3) above.
What are the cases where you cannot use CA schedule S but must "look to the non-resident state to give you a credit, if any."?
CA residents cannot use Schedule S for income from Arizona, Guam, Indiana, Oregon, and Virginia. Conversely, residents of these states use Schedule S on their CA non-resident return if there is double-taxed income.
On a related subject, many states have reciprocal agreements with their neighbors that allow a nonresident to request exemption from withholding thereby avoiding having to file a nonresident return and avoiding having to apply for a credit from their resident state for taxes paid to the state they work in. See the link below for more info:
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