Credit for Taxes Paid to Another State or Country
Complete this form only if you meet the following:
- You are filing an Arizona income tax return.
- You paid a net income tax to another qualified state or country.
- If you are claiming a credit for taxes paid to another state, payroll taxes withheld from income do not constitute a net income tax. Having tax withheld from your pay by Arizona and another state does not by itself qualify you for this credit. You must file a net income tax return to the other state.
- If you are claiming a credit for taxes paid to another country, a net income tax paid to another country includes those taxes that qualify for a credit under Internal Revenue Code Sections 901 and 903.
You may not claim this credit for the following:
- Income taxes paid to any city or county.
- Interest or penalties paid to another state or country.
Application of Credit
Claim this credit only if the income was subject to tax in both Arizona and the other state or country in the same tax year. You cannot apply this credit against interest or penalties payable to Arizona.
NOTE: You may use this credit only in the year incurred. If your credit is more than your Arizona income tax liability, you cannot carry the credit forward to the next year. You also cannot carry the credit back to a prior year.
Arizona residents are allowed a credit against Arizona income taxes for net income taxes imposed by and paid to another state or country if the following apply:
- The income taxed in Arizona is derived from sources within another state or country. This income is subject to a net income tax in the other state or country regardless of your residence.
- The other state or country does not allow Arizona residents a credit for taxes imposed on income subject to tax in both Arizona and the other state or country.
A credit against Arizona income taxes is allowed for Arizona nonresidents who are not allowed a credit by their state or country of residence for taxes paid to Arizona if either:
- The other state or country does not tax Arizona residents on income derived from sources within the other state or country.
- The other state or country allows Arizona residents credit for taxes paid on income subject to tax by the other state or country and Arizona.
Arizona nonresidents who file resident returns with the following states qualify for the credit: California, Indiana, Oregon and Virginia.
NOTE: This list is subject to change at any time.
For that part of the year you were a resident of Arizona, follow the instructions for residents.
For that part of the year you were an Arizona nonresident, follow the instructions for nonresidents.