If you are a Utah resident or part-year resident with income that is taxed by Utah and another state(s), the District of Columbia, or a possession of the United States, you may be entitled to a credit for income tax paid to the other state(s). Nonresidents do not qualify for this credit. Complete Schedule B to see if your income was taxed by both states.
You can only take this credit for individual income tax (i.e., you cannot take it for sales tax or local taxes). You may take this credit for taxes paid to another state by a pass-through entity only if the income is included on TC-40, line 9 (Utah taxable income).
Complete and attach form TC-40S, Credit for Income Tax Paid to Another State. If there are two or more states, calculate each state separately. Carry the sum of the credits from TC-40S, line 7 to TC-40A, Part 4, using code 17.
Do not use the state income tax withheld from form W-2 as the tax paid to the other state. You must complete and file the other state’s return to determine the tax amount paid. You may have to provide additional information later to verify this credit.
Part-year residents rarely qualify for this credit. If you are domiciled in Utah for part of the year and domiciled in another state for part of the year, you may only claim credit on the portion of income:
- taxable in Utah,
- taxed also by the other state(s), and
- included in “Column A – Utah” income on form TC-40B.
Part-year residents must prorate and enter the tax paid to the other state(s) on TC-40S, line 6. The credit only applies to tax paid on the part of your income (TC-40, line 1) taxed by both states.
Note: You may not carry forward or back any credit that is more than your tax liability.
Keep a signed copy of the other state’s return and all related documents with your records.
FYI: Common Credit 17 Errors
- Claiming the withholding amount on a W-2 as taxes paid to another state.
- Claiming credit for taxes other than income tax.
- Claiming the entire amount of tax paid to another state.
- Part-year residents not prorating correctly on TC-40S.