My client is AZ resident and files a NR return with an eastern state due to the fact his W-2 witholds that states eastern states income tax. Incredible that AZ only credits my client approx 60% of that income tax witheld. Unless I did this wrong.
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Which State?
AZ, depends on whether that state has a higher tax rate than Arizona.
The credit should measure the income taxable to Arizona at AZ rates, calculate the tax, and then compare to the tax actually PAID on that income to the eastern state.
AZ resident gets credit for whichever tax is lower. All states work this way.
Except Wisconsin - they will give credit for the amount regardless of whether their tax rates is higher or lower. I believe Wisconsin will fix this obvious overlooked revenue source before this recession is over.
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