NYS "resident credit" (it-112) income question

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Subject Author Date NYS "resident credit" (it-112) income question George 03-22-2009  Re: NYS "resident credit" (it-112) income question Tom Healy CPA 03-23-2009  Re: NYS "resident credit" (it-112) income question George 03-24-2009
Posted by George on March 22, 2009, 6:24 pm Please log in for more thread options 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 -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Tom Healy CPA on March 23, 2009, 4:10 pm Please log in for more thread options > 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 > Many states figure the tax on your entire income and then pro-rate it based on that state's income. I think that is what Iowa is doing. Make sure you are doing their computation correctly. Also I believe Iowa is one of the states that has a reciprocal tax arrangement with neighboring states, and you may have found yourself in that part of their return (which shouldn't apply to you). Your IT-112 credit is based on the Iowa income (net rental income from Schedule E) as a percentage of NY adjusted gross income. Tom Healy, CPA, CSA Boulder, CO -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by George on March 24, 2009, 12:19 am Please log in for more thread options wrote: >> 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 >> >Many states figure the tax on your entire income and then pro-rate it >based on that state's income. I think that is what Iowa is doing. Make >sure you are doing their computation correctly. Also I believe Iowa is >one of the states that has a reciprocal tax arrangement with >neighboring states, and you may have found yourself in that part of >their return (which shouldn't apply to you). Your IT-112 credit is >based on the Iowa income (net rental income from Schedule E) as a >percentage of NY adjusted gross income. > >Tom Healy, CPA, CSA >Boulder, CO Thanks. I trust you know whereof you speak. All the same, it seems a little unreasonable to me - the Iowa bracket is set by our total income, but the NY credit is set by the Iowa-source income. Net is, we only get credit for less than half the Iowa tax. Oh well. If you have the inclination to explain, I'm puzzled by the way NY computes the out-of-state 'AGI-equivalent' (line 20 of it-112) - if the 'gross income' (line 16) is Iowa-source only, what is the logic of then subtracting our entire federal adjustment from this, and calling it AGI? On the IA-1040, the adjustment is applied against our TOTAL income, not just the IA-source portion. So, I think NY is wrong to start with, and then not even self-consistent. Again, oh well. Anyway, thanks for the reply. George -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted SIMPLE QUESTION RE: NJ INCOME TAX FOR TOTAL NON-RESIDENT April 12, 2007, 12:25 am OH Retirement Income Credit - Income from decedent IRA to heir March 14, 2009, 11:37 pm S-Corp income from another state for California resident April 5, 2007, 2:08 am Non Resident filing question February 5, 2007, 8:22 pm question about Non Resident (NRA) tax withheld April 12, 2008, 4:59 pm CA part-year resident question May 29, 2009, 11:26 am Massachusetts Part-year resident working in 3 states - Income tax February 5, 2008, 10:38 am Relatively simple question: Michigan Resident, New York Internship November 29, 2007, 5:54 pm Foreign Earned Income exclusion: bona fide resident rule allows > 30 day vacation in the USA? 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