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Reciprocal states and credit for taxes paid to other states

Reciprocal agreements

Michigan has reciprocal agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin. If any of these states withheld taxes for a Michigan full-year resident, you'll need to file a nonresident return with that state indicating the full-year residency in Michigan.
Michigan residents pay only Michigan income tax on their salaries and wages earned in any of these states. A Michigan resident can file a withholding form with an employer in a reciprocal state to claim exemption from that state's income tax withholding. The out-of-state income might make Michigan income tax estimate payments necessary. Residents of reciprocal states working in Michigan don't have to pay Michigan tax on salaries or wages earned in Michigan but do have to pay Michigan tax on business income earned from business activity in Michigan. A resident of a reciprocal state who claims a refund of Michigan withholding tax needs to file a Schedule NR.

Data entry

The following information is required on the
MISTCr
 screen to complete the Michigan tax paid to other states credit worksheet and calculate the credit. If you're using UltraTax CS to file a multi-state return, and the nonresident return is calculating a tax liability, UltraTax CS will automatically calculate these fields for the resident return. UltraTax CS calculates 1 worksheet for every unit of this screen you complete.
  1. State postal code / Name of nonresident state or local government unit outside Michigan:
     Enter the state postal code and the name will automatically populate.
  2. Total income taxed by other state or locality:
     Enter the total income subject to tax on the resident state, local, or provincial return in the
    Force
     field.
  3. Income taxed by Michigan and other state or locality:
     Enter the income subject to tax on the nonresident state, local, or provincial return in the
    Force
     field.
  4. Tax paid to other state or locality:
     Enter the tax paid from the nonresident state, local, or provincial return in the
    Force
     field.
If local taxes were paid to cities of reciprocal states, you'll need to include those amounts in these fields to claim this credit.
UltraTax CS calculates Michigan's credit for tax paid to another state, using only wages that are double-taxed. A Michigan resident that has income from a business, partnership, rental, etc., and is taxed by another state or locality, isn't eligible for the credit for tax paid to other states. UltraTax CS instead treats this income as a Michigan subtraction.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1040 Individual
  • State: Michigan
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