AB 150 PET & VA resident and CA reverse credit - Spidell

AB 150 PET & VA resident and CA reverse credit

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Message Board AB 150 PET & VA resident and CA reverse credit

  • This topic has 6 replies, 3 voices, and was last updated 2 weeks ago by Anonymous .
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    • #323401
      Anonymous
      Participant

      Hello,

      Can you please provide some insight on the VA resident who claims a reverse credit on CA and how that will work with the PET election made in CA.  Thank you in advance.

    • #323432
      Lynn Freer
      Participant

      They will compute the tax to CA after the AB 150 credit and compare that to the VA tax.

    • #323571
      SELMA BILAL
      Participant

      Hi Lynn,

      Thank you for your response.  Can you please confirm this is still the case since VA currently does not allow for PET credits.  Thank you

       

       

    • #323574
      Lynn Freer
      Participant

      yes

    • #323621
      SELMA BILAL
      Participant

      thank you!

    • #323653
      Anonymous

      Let’s play with some numbers here:

      $100K CA Source Income.

      Let’s say the VA resident pays $5,750 of VA tax on the and $9,300 of CA tax on the $100K.  Let’s also say the taxpayer has no other CA source income.

      If the taxpayer opts out, they will pay $5,750 to VA and $3,550 to CA.  They will also receive an additional $9,300 distribution from the PTE.  Net after tax cash flow = $0

      If the taxpayer opts in and has the PTE pay $9,300 to CA, they will pay $5,750 to VA $0 to CA.  They will not get their $9,300 distribution.  They will get a Fed deduction for the $9,300.  Assuming 24% bracket, that is worth $2,200.  Therefore, net after tax cash flow = -$3,518.

      It would seem a taxpayer residing in a reverse credit state will want to opt out.

      And… It would also seem a taxpayer residing in a non-reverse credit state will also want to opt out.

       

    • #323951
      Anonymous

      I just tested this on an AZ resident (another reverse credit state).   I got the same results.  The PTE credit reduces the CA tax to zero.  The taxpayer gets no value from the out-of-state tax credit.

      Paying the PTE tax would only make sense if the taxpayer has other CA source income in addition to the income from the PTE.

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