If you are a resident of Delaware (or elect to be taxed as one) and pay income taxes to another State on income earned in the other State which is also included in your Delaware taxable income, the law allows you a tax credit against your Delaware income tax. Do not include city wage taxes or county taxes payable with your other State return.
With regard to any credit claimed for taxes paid to another state, the credit is limited to the smallest of the following:
- The Delaware tax liability;
- The tax liability due and paid to the other state (not including amounts paid on your state return to local jurisdictions). The amount due and paid means the amount shown as liability on the 2005 other State return and not the amount on your W-2; or
- The amount computed by multiplying the Delaware tax by a fraction, the numerator of which is your adjusted gross income from sources in the other state and the denominator of which is your Delaware Adjusted Gross Income.
If the other state income is not included in Delaware Source Income, then the other State tax credit cannot be taken in Delaware for that income.
NOTE: Taxes paid to a political subdivision of a state cannot be claimed as credit. The District of Columbia, however, is classified as a State for the purpose of this credit and, therefore, can be claimed as credit here.
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