Current through Register Vol. XLI, No. 38, September 20, 2024
20.1. General. - A West Virginia resident may
be allowed a credit against his West Virginia personal income tax for any
personal income tax imposed for the taxable year by another state of the United
States or the District of Columbia, upon income derived from sources within the
other state or the District. Where a resident estate or trust receives income
from another state of the United States or the District of Columbia, then the
estate or trust is entitled to a similar credit, computed in the same manner
and subject to the same exceptions and limitations as in the case of a resident
individual. No credit, however, shall be allowed for personal income taxes
imposed by a county, municipality, borough, township or any other political
subdivision of a state or for any taxes other than personal income taxes.
20.1.1. The amount of the credit allowed
under W. Va. Code '11-21-20(a)
and Subsection 20.1 above shall be determined in accordance with forms and
instructions provided by the Tax Commissioner.
20.1.1.1. The Tax Commissioner may by
instruction or otherwise require any resident individual, estate or trust to
provide evidence, including but not limited to, a copy of the completed and
signed nonresident personal income tax return filed with the other taxing
jurisdiction for the taxable year, in order to establish that the individual,
estate or trust is entitled to claim a credit under the provisions of W. Va.
Code '11-21-20.
20.1.1.1.a. No credit shall be allowed under
W. Va. Code '11-21-20
unless the taxpayer has proved to the satisfaction of the Tax Commissioner the
amount of tax paid to the other taxing jurisdiction. A Form W-2 indicating
personal income tax withheld for another jurisdiction shall not be sufficient
to establish credit under this Section. The mere fact that tax was withheld
does not establish the fact that the taxpayer has been liable for the payment
of tax to another jurisdiction. Therefore, when claiming a credit for taxes
paid to another jurisdiction, the taxpayer must file with his West Virginia
Personal Income Tax Return a signed copy of the personal income tax return
filed with the other jurisdiction. Such return shall be considered as prima
facie evidence of the amount of personal income tax, if any, paid to the
jurisdiction.
20.2. Limitation. - The amount of the credit
allowed to a resident individual is subject to the following limitations:
(1) The credit allowed shall not exceed the
amount of tax actually payable to the other jurisdiction on income also subject
to West Virginia tax.
(2) The
credit shall not exceed the percentage of the West Virginia personal income tax
determined by dividing the portion of the taxpayer's West Virginia income
subject to taxation in such other jurisdiction by the total amount of the
taxpayer's West Virginia income. For example, if the total income of a resident
was five thousand dollars ($5,000) and two thousand dollars ($2,000) thereof
was subject to tax by another jurisdiction, the amount of the West Virginia tax
credit would be limited to forty percent (40%) ($2,000 divided by $5,000) of
the West Virginia tax.
(3) The
credit shall not reduce the West Virginia personal income tax otherwise due to
an amount less than would have been due if the income subject to taxation by
the other jurisdiction were excluded from the taxpayer's West Virginia income.
If in the example above, the West Virginia personal income tax would have been
twenty dollars ($20) less by eliminating the other jurisdiction's income from
the income subject to West Virginia personal income tax, the credit shall be
limited to twenty dollars ($20).
20.3. Exception. - Where there exists a
written reciprocal credit agreement between West Virginia and another taxing
jurisdiction as authorized under the provisions of W. Va. Code '11-21-40,
no credit shall be allowed for a tax levied by such other jurisdiction against
personal income taxes imposed by this State.
20.3.1. The resident credit allowed under W.
Va. Code '11-21-20(a)
and Subsection 20.1 of this regulation is only applicable where another taxing
jurisdiction has not by written agreement with this State consented to grant
nonresidents a credit for personal income taxes imposed by the state of
residence. In such cases, the taxpayer must look to West Virginia for the
applicable credit and must claim the credit on the West Virginia Personal
Income Tax Return.
20.3.1.1. Example. - X, a
resident West Virginia taxpayer, earns income in Virginia during the taxable
year. Presuming this State and Virginia are operating under a written
reciprocal credit agreement whereby Virginia grants nonresidents a credit for
personal income tax imposed by the state of residence on the income earned in
Virginia, this taxpayer who receives a credit by Virginia on his nonresident
Virginia return for West Virginia personal income taxes paid is not entitled to
a credit on his West Virginia resident return for personal income tax imposed
by Virginia.
20.4. Definitions. - For purposes of W. Va.
Code '11-21-20
and this regulation, the terms and phrases set forth below shall have the
following meaning.
20.4.1. "West Virginia
income" means the West Virginia adjusted gross income of an individual or the
amount of the income of an estate or trust determined as if the estate or trust
were an individual computing his West Virginia adjusted gross income as
described in Section 12 of these regulations.
20.4.2. "West Virginia tax" means the total
tax payable on the West Virginia taxable income of the resident individual
under the West Virginia Personal Income Tax Act excluding any amounts
representing penalties or interests.
20.4.3. "Tax of the other jurisdiction" means
the total tax imposed for the taxable year by a state of the United States
other than West Virginia or by the District of Columbia as provided under
Subsection 20.1 of this regulation, exclusive of any penalty or
interest.
20.4.4. "Income derived
from sources within" means compensation for personal services performed in the
other jurisdiction, income from a business, trade or profession carried on in
the other jurisdiction and income from the ownership of real or tangible
personal property situated in the other jurisdiction but not income from
intangibles, except where such income is from property employed in a business,
trade or profession carried on in the other jurisdiction.
