How much do I enter for the tax liability on double-taxed income?
For Full-Year Arkansas Residents
If you lived in Arkansas all year, you will usually enter the tax liability shown on your other state's tax return.
Example 1
He enters $450 as the tax liability from Mississippi.
For Part-Year Residents or When Only Part of Your Income is Double-Taxed
If you lived in Arkansas only part of the year or some income is not taxed by both states, you must calculate how much of the other state's tax applies to the income taxed by both states.
How to calculate:
James enters $1,250 as the tax liability on double-taxed income.
If you have questions about where to find these numbers, look for:
If you lived in Arkansas all year, you will usually enter the tax liability shown on your other state's tax return.
- Look for a line called Total Tax, Total Income Tax, Total State Tax, or something similar on your other state return.
- Do NOT use withholding amounts (the taxes taken out of your paycheck). Withholdings are amounts you have already paid, not your total tax owed.
- The tax liability should be the tax after any credits or reductions your other state gave you.
- This means you are entering the actual tax you owe to the other state, not the amount withheld or paid in estimates.
Example 1
- Derek lives in Arkansas all year and works in Mississippi.
- His W-2 shows:
- Federal wages: $40,000
- Arkansas wages: $40,000
- Arkansas withholdings: $600
- Mississippi wages: $40,000
- Mississippi withholdings: $400
- On his Mississippi tax return:
- Tax before credits: $500
- Tax after credits: $450
- Tax due with return (after subtracting $400 withholding): $50
He enters $450 as the tax liability from Mississippi.
For Part-Year Residents or When Only Part of Your Income is Double-Taxed
If you lived in Arkansas only part of the year or some income is not taxed by both states, you must calculate how much of the other state's tax applies to the income taxed by both states.
How to calculate:
- Find your double-taxed income: This is the amount both Arkansas and the other state taxed.
- Find your other state's total taxable income (shown on the other state's return).
- Find your other state's tax liability after credits.
- Then, use this formula:
Tax on double-taxed income = (Double-taxed income / Other state total income) x Other state tax liability
Example 2
- James moved from Arkansas to Mississippi mid-year but worked one week a month in Arkansas.
- His W-2 shows:
- Federal wages: $100,000
- Arkansas wages: $75,000
- Mississippi wages: $50,000
- Calculate double-taxed income:
- Arkansas wages ($75,000) + Mississippi wages ($50,000) = $125,000
Subtract total federal wages ($100,000):
$125,000 - $100,000 = $25,000 (double-taxed income) - Mississippi tax return shows:
- Income : $50,000
- Tax liability after credits: $2,500
- Tax due after withholding: $300
- Calculate tax on double-taxed income:
(25,000 / 50,000) x 2,500 = 1,250
What James entersJames enters $1,250 as the tax liability on double-taxed income.
If you have questions about where to find these numbers, look for:
- W-2 form: to find your wages for each state (boxes labeled "State Wages" or similar).
- Other state tax return: to find your total tax liability (not withholding).
