Questions & Answers

What is the Credit for Taxes Paid to Another State or Country?

You can claim the Credit for Taxes Paid to Another State or Country if the following apply:

  1. The income taxed in Arizona is 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.
  2. 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.
If you think you might qualify for this credit, follow the prompts related to Arizona's Credit for Taxes Paid to Another State or Country so we can calculate the amount of credit you qualify for. You may need to fill out your other state (or country) tax return first to have all the information needed to calculate your Arizona credit.

Example:
Jane lived in Arizona for all of 2020 and commuted to New Mexico for her regular job as an elementary school teacher. Jane also taught piano lessons at her home in Arizona on her days off.

Jane may qualify for Arizona's Credit for Taxes Paid to Another State or Country if she meets all of the following conditions:
  1. The income Jane earned in New Mexico is subject to both Arizona state income tax and New Mexico state income tax.
  2. New Mexico won't allow Jane a credit on her New Mexico tax due even though Jane lives in Arizona.
Jane may need to fill out her New Mexico return first to calculate this Arizona credit. This credit only applies to Arizona tax imposed on the income she earned in New Mexico as a teacher. It doesn't include the Arizona taxes imposed on her income from teaching piano since that income was earned in Arizona.

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