Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 110 - INDIVIDUAL INCOME TAX › Section 23VAC10-110-222 - Credit for income taxes paid in another state; nonresidents

Current through Register Vol. 40, No. 24, July 15, 2024
A. Generally. Any
				nonresident of Virginia who has become liable to his state of residence for
				income tax upon his Virginia taxable income may be eligible for a credit
				against Virginia income tax liability for all or a portion of such liability,
				subject to the qualifications set forth in subsections B through D of this
				section.
(NOTE: As of September 19, 1984, only residents of Arizona,
				  California, District of Columbia, Maryland, New Mexico and West Virginia may
				  claim this credit.)
B.
				Qualifying income. Tax payable to another state on income from Virginia sources
				which is subject to Virginia income tax may be creditable in whole or in part,
				against an individual's Virginia income tax liability.
C. Credit amount. The amount of credit
				allowed is computed by determining the ratio of Virginia taxable income to
				taxable income in the taxpayer's state of residence multiplied by the tax paid
				to such other state. The following examples illustrate the computation of this
				credit.
(NOTE: All of the following examples assume that State X is
				  either Arizona, California, D.C., Maryland, New Mexico, or West
				  Virginia.)
EXAMPLE 1: Taxpayer A, a resident of State X is a single
				  individual who does not itemize deductions. A has income from all sources (in
				  this case, equal to FAGI) of $20,000, taxable in State X to which A is liable
				  for $800 in tax. $15,000 of this income is derived from Virginia sources and is
				  taxable in this state. The credit allowed is computed as follows:
FAGI =
$20,000
Less:
Personal Exemption
(600)
Standard Deduction
(2,000)
Va. taxable income computed as a resident =
$17,400
Nonresident taxable income =
17,400 x
15,000
-
Va.
source income
20,000 -
						  Income from all sources
= $13,050
Virginia tax liability on $13,050 = $530.81
Available Credit =
Va.
taxable
						  income
Income taxable to residence state
x Tax imposed by residence state
=
13,050
20,000
x 800 = $522
Credit allowed = $522 and A would be liable to Virginia for
				  $8.81 in tax.
EXAMPLE 2: Assume the same facts as Example 1 except that
				  $10,000 in income is derived from Virginia sources and a tax liability of
				  $1,000 is incurred to State X. The credit allowed is computed as
				  follows:
Va. taxable income computed
				as a resident = $17,400
Nonresident taxable income =
17,400 x
10,000
-
Va.
source income
20,000 -
						  Income from all sources
= $8,700
Virginia tax liability on $8,700 = $304.88
Available Credit =
Va.
taxable
						  income
Income taxable to residence state
x Tax imposed by residence state
=
8,700
20,000
x 1000 = $435
Credit allowed = $304.88 (Credit is limited to Virginia tax
				  liability.)
EXAMPLE 3: Taxpayer J, a resident of State X has total income
				  (in this case, equal to FAGI) of $50,000, $30,000 of which is 40% of a long-
				  term capital gain from the sale of property located in Virginia. J is single
				  and has $5,000 in itemized deductions. State X disallows the federal 60%
				  deduction for long-term capital gains, thus J's taxable income in State X is
				  $95,000 (50,000 + additional 45,000 on capital gain) and is liable to State X
				  for tax of $3,800. The Virginia credit allowed is computed as follows:
FAGI =
50,000
Less:
Personal Exemption
( 600)
Standard Deduction
( 5,000)
Va. taxable income computed as a resident =
$44,400
Nonresident taxable income =
44,400 x
30,000 =
Va.
source income
50,000 =
						  Income from all sources
= $26,640
Virginia tax liability on $26,640 = $1,311.80
Available Credit =
Va.
taxable
						  income
Income taxable to residence state
x Tax imposed by residence state
=
26,640
95,000
x 3800 = $1,065.60
Credit allowed = $1,065.60 and A would be liable to Virginia
				  for $246.20 in tax.