25. Robert, who earns income and pays state tax on that income in Arizona, but resides...

25. Robert, who earns income and pays state tax on that income in Arizona, but resides in California, can claim a tax benefit for that tax on the California tax return. The benefit is called what?

A. A credit

B.A deduction

C.An offset

D. Gift

Solutions

Expert Solution

Answer:

Option A is Correct

BeCaliforniause of the agreement between Arizona and California, instead of an Arizona resident getting a state tax credit for taxes paid on a California nonresident state income tax return, you need to paid the taxes on this California-sourced income in Arizona and will be allowed an Arizona tax credit on your California nonresident state income tax return. So this means that you will get a refund of your California withholdings but you will need to pay taxes in Arizona on this California source income.

Arizona, as your resident state, gets to tax your world-wide income. California gets to tax your compensation because it was earned there.

The nonresident TT/California will begin to prepare a tax credit for the compensation that both states are taxing to help avoid double taxation. You will likely have to help TT/California by entering the amount of Arizona income that California is also taxing (your California compensation). Prepare your resident Arizona return first, then the nonresident California return.

In TT/California's Nonresident Adjustments, be sure to only allocate as California-source your compensation there. All other income items should be entered as -0- California-source

ekkarill92 answered 7 months ago

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