Credit for Income Tax Paid To Another State or Country
If you are a resident of North Carolina and have income reportable to North
Carolina that is also being taxed by another state or country, you may be entitled
to claim a tax credit on your North Carolina return. This tax credit gives you
relief from being taxed twice on the same income. It will either increase your
refund or decrease the tax you owe.
The credit is available to North Carolina residents who
receive income from sources in another state or country that is taxed by North
Carolina and the other state or country. No credit is allowed for income taxes
paid to a city, county, or other political subdivision of a state or to the
After completing the return of the other state, complete your North Carolina return
and include all income from inside and outside the State. Compute your tax as
though no credit is being claimed. Complete Part 1 of Form D-400TC to determine
the allowable tax credit. A common mistake is to enter on line 6 of Part 1,
the total tax withheld by the other state or country. The amount entered on
line 6 of Form D-400TC, must be the tax paid to the other state or country less
any refund received, or expected to be received, from the other state or country.
The credit cannot be more than your North Carolina tax liability; therefore, you must complete Part 4 of Form D-400TC to limit the credit to the tax liability.
If you claim credit for tax paid to more than one state or country,
use the worksheet on page 17 of the instructions to determine the tax
credit allowable. Determine the total credits for all states by adding
the amount on line 7 of each worksheet and enter the total on Form D-400TC,
line 7a. Do not fill in lines 1 through 6 of the Form D-400TC if you
are claiming a credit for tax paid to more than one state or country.
Be sure to use separate worksheets to determine the separate credits
for each state or country.
Attach the Form D-400TC to your North Carolina return with a copy of the tax
return filed with the other state or country. You should also include proof
of payment such as a wage and tax statement or a copy of the check or receipt
if you paid tax to the other state or country.
Last modified on:
01/03/13 03:39:46 PM.