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Credit for Income Tax Paid to Other State or Canadian Province
(FOR FULL-YEAR AND SOME PART-YEAR VT RESIDENTS ONLY)
Claimed on VT Form IN-112, VT Calculation B

See Technical Bulletin 38 if you have capital gain, business income, or have made adjustments to arrive at Federal Adjusted Gross Income.

Part-Year Residents – Click here if you earned income in another state while a VT resident.

Supporting Documents Required: Copy of 2008 tax return filed in the other state(s). For Canadian Province(s), a copy of 2008 provincial tax return filed, copy of Federal Form 1116 (Foreign Tax Credit) and Revenue Canada income tax return. Convert amounts on Canadian returns to U.S. dollars.

A credit may be allowed against 2008 VT income tax for income tax paid in this tax year to another state or Canadian province on income taxed by both VT and the other taxing jurisdiction. The credit does not include city or county taxes. Credit for Canadian provincial income tax excludes the portion used as a foreign tax credit on Federal Form 1040.

More Than One State or Province?

  1. Complete a VT Calculation B for each state or Canadian province. Do not combine the income and credit of all states or Canadian provinces on one Schedule IN 112.

  2. Add Line 6 from each VT Calculation B to get the tax credit entry on Form IN-111, Section 5, Line 23.

  3. Attach a Schedule IN-112, VT Calculation B for each state or Canadian province as well as a copy of each state or Canadian provincial income tax return to your VT income tax return.

First complete VT Form IN-111. 

Next, identify the adjusted gross income for the state or Canadian province.  Remember – only include income that is taxed by VT and also taxed by another state or Canadian province for the same tax year. Adjust the amount if there is long-term capital gain included.  This long-term capital gain adjustment is limited to the smaller of 40% of adjusted net capital gain income as defined in Section 1(h) of the IRC, or 40% of Federal taxable income.   Note:  The capital gain for another state or Canadian province included in the adjusted gross income of another state or Canadian province cannot be greater than capital gain on Federal Form 1040, Lines 13 and/or 14. See Technical Bulletin 38.

Then use the adjusted gross income from Form IN-111, Line 10, and adjust that amount by the long-term capital gains reported on the VT return.  This is the smaller of Line 14c or 14e of VT Form IN-111.
The ratio of the non-VT income to income reported to VT produces the VT tax that would be paid on the non-VT income in VT.  The credit is the smaller of the calculated VT tax on the non-VT income or the amount of tax actually paid to the other state or Canadian province. 

The non-VT income does not include county and city taxes.  Tax is income tax paid.  Withholding to the other state or Canadian province is not the income tax liability.

 

   
Vermont Department of Taxes, 133 State Street, Montpelier, Vermont 05633-1401