ennsylvania Schedule G-L - Credit for Taxes Paid to Other States or Countries Instructions

A Pennsylvania resident can receive a credit for income tax, wage tax or other tax (measured by gross or net earned or unearned income) paid to another state or country when the other state or country imposes its tax on income also subject to PA Personal Income Tax in the same taxable year. For example, a PA resident who earns wages in Delaware and pays Delaware income tax can claim a credit (subject to the limitations described below) for the tax imposed by Delaware on his/her compensation.

PA Schedule G-L is intended for use by a taxpayer who has income in any class of income that is also subject to tax in any other state or country. However, no item of Pennsylvania taxable income can be taxable in more than one other state or country. For example, you cannot have the same item of gain from the sale exchange or disposition of property taxable in Pennsylvania, New York and Delaware and be eligible to file PA Schedule G-L for New York and Delaware. The property can only be subject to tax in the state of residency (PA) and one other state or country, unless the property has its source in PA and in which case it can only be subject to tax in PA.

Taxpayers who only have wages subject to tax in more than one state or country or interest and dividends subject to tax in foreign countries may be able to use PA Schedule G-S to claim the credit. See PA Schedule G-S for more information. To obtain PA Schedule G-S, contact the district office nearest you, the Department’s Web site at www.revenue.state.pa.us or use one of the Forms Ordering Services found on page 3 of the PA-40 instruction booklet.

Individual taxpayers who complete one or more PA Schedules G-S and/or PA Schedules G-L must list the information from these schedules on one of Lines 1 through 20 of PA Schedule G-R. Resident credit for individual taxpayers will not be granted unless PA Schedule G-R is completed.

Estates and trusts must total the allowable credit from Line 6 of all PA Schedules G-S and/or G-L and enter the total on Line 13 of Form PA-41, the fiduciary income tax return.

GENERAL INSTRUCTIONS

If you can claim a resident credit as described above, your credit is the lesser amount of:

  • The tax due to the other state or country (as may be adjusted), or
  • The tax calculated using the PA classified taxable income that you earned, received or realized in the other state or country multiplied by the Pennsylvania tax rate of 3.07 percent (0.0307).

If you complete PA Schedule G-L, you are required to submit some or all of the following as appropriate:

  1. Copies of the income tax returns that you filed with the other states or countries.
  2. A copy of each Form W-2 (if available) that shows any compensation that the other states or countries taxed (or a statement that shows how the compensation in the other states or countries was determined).
  3. Copies of the PA Schedule RK-1, showing the amount of resident credit passed through to the shareholder along with the statement showing the shareholder’s proportionate share of the income and tax paid for each state or country.
  4. A copy of a statement from the partnership or limited liability company (entity) setting forth the amounts of income (by class) subject to tax in the other states or countries, along with the amount of tax paid to such states or countries.
  5. Copies of federal partnership K-1s showing amounts of foreign income subject to tax and taxes paid to foreign countries along with a statement showing the income and taxes paid on a country-by-country basis.
  6. Any other documentation from brokers, companies or banks showing the amount of foreign income subject to tax and foreign taxes paid.
  7. A copy of Federal Form 1116 if you listed interest or dividend income from foreign countries as “Various.” If you submit Federal Form 1116, individual pages from broker statements are not required. However, you must submit a statement showing the interest and dividend income and taxes paid on a country-by-country basis. See also the instructions for Lines 2d and 2e, Column B on page 2.

Individual taxpayers are required to submit PA Schedule G-R in order to claim resident credit.

The worksheets from Part II of the PA Schedule G-L showing the nature (class) of the income subject to tax in the other state(s) or country(ies) by the source (entity or transaction) of the income must also be completed in order to claim the credit. Returns for the other states or countries do not need to be signed. You may be required at a later date to provide additional documentation to the Department such as (but not limited to) checks, money orders, foreign currency transaction statements and other related documents in order to substantiate income taxes paid or the amount of tax reported to other states or countries as due and payable.

PAS corporations, partnerships and limited liability companies filing returns on behalf of shareholders, partners and members. If you are a PA S corporation, partnership or limited liability company (entity) that filed an entity return with another state for income tax to be paid on behalf of the shareholder, partner or member (owner), you must provide additional information to the owner. The additional information should be provided on a statement separate from the PA Schedule RK-1 for the entity. The statement will include the owner’s name, Social Security number, name of the entity, tax or fiscal year for which the information is provided, along with a summary, in proportion to the owner’s share of ownership (or other method for determining the owner’s share of profits, losses, gains or credits) in the entity, the amount of taxes paid to other states or countries and the class or classes of income that are subject to tax in those other states or countries. The amount of resident credit calculated on a PA Schedule G-L or PA Schedules G-L for a PA S corporation will also be included on the statement for each shareholder owner in such entity and must match the amounts reported on PA Schedule RK-1 for that owner.

NOTE: If you use PA Schedule W-2S to report compensation and you claim a resident credit for taxes paid to another state or country on compensation, you must include copies of any Forms W-2 for the compensation subject to tax in the other states or countries.

CAUTIONS: If you paid income tax to another country on a tax return in a foreign language, you are required to submit a translation, or copy of the return, in English, with all amounts converted to US dollars. You must also provide the conversion rate used to make the conversion. If the other country does not have a tax return system, please submit Federal Form 1116, Foreign Tax Credit, whether or not you file this form with your Form 1040 return.

If claiming a resident credit from more than one state or country, you must file a separate PA Schedule G-S or G-L for each state or country (unless otherwise provided for per the instructions for Lines 2d and 2e, Column B). Individual taxpayers must list the credits from each PA Schedule G-S or G-L in Column E on one of Lines 1 through 20 of PA Schedule G-R. Estates and trusts must total the allowable credit from Line 6 of all PA Schedules G-S and/or G-L and enter the total on Line 13 of Form PA-41, the fiduciary income tax return.

PA income tax law does not allow a resident credit for taxes paid to political subdivisions of other states. Ask your local taxing authority if you are eligible for a credit for the tax paid to a political subdivision outside Pennsylvania or the difference between the tax you paid to another state and the credit you claimed on your PA Schedule G-L.

SPECIFIC INSTRUCTIONS

Part I - Instructions for Calculation of Credit for Taxes Paid to Other States or Countries

Enter the name of the taxpayer or spouse who is claiming the credit. Taxpayers using the “Married Filing Jointly” status may not claim the credit on a joint basis for any classes of income except interest and dividend income. Separate PA Schedules G-L and G-R must be prepared to report the income for a taxpayer and spouse for all other classes represented on PA Schedule G-L. Enter the Social Security number of the taxpayer or spouse as appropriate. Enter only the primary Social Security number for “Married Filing Jointly” status claims on interest and dividend income from foreign sources. A taxpayer and spouse with compensation, gains or rental income and jointly received interest and dividend income all subject to tax in the same country must report their income and tax on a separate PA Schedule G-L for the compensation, gains or rental income. The couple may include the interest or dividend income on a separately prepared combined PA Schedule G-S or G-L for the interest or dividend income or include one-half of the interest and dividend income on each separately prepared PA Schedules G-L.

IMPORTANT: When using fractions or ratios to determine amounts for this schedule, calculate out to six decimal places. Also see “Special Instructions for Taxpayers Reporting Amounts on PA-40 Line 10, Other Deductions” on Page 4 of these instructions.

Line 1

Enter the name of the other state or country to which you owed or paid income tax. A separate PA Schedule G-L should be filed for each state or country in which you claim a resident credit. Do not enter Pennsylvania. Taxpayers claiming a credit for foreign taxes paid only on interest and dividend income may combine the income and taxes from various countries and write “Various” on Line 1. However, a separate statement must be included to illustrate the amounts of income and taxes paid for each country in order to receive credit for the combined amounts reported. You may not claim a credit for interest or dividend income subject to tax in another state or country on which no income tax was paid.

If the credit claimed for a state or country is listed as part of the credit shown on Line 8 of an S corporation PA Schedule RK-1, fill in the oval. Also fill in the oval if the credit being claimed for a state or country is listed as part of the credit on a separate schedule or listing as a partnership or limited liability company. You must enter all other data as required by the instructions and the name of the entity in Part II of the PA Schedule G-L.

COMPENSATION

Line 2a

Column A. If a taxpayer or spouse has compensation subject to tax in another state or country, enter the amount of gross compensation subject to tax for the taxpayer or spouse in PA from Line 1a of the PA-40. Otherwise, leave this line blank.

Column B. If a taxpayer or spouse has compensation subject to tax in another state or country, enter the amount from the other state or country’s return. Do not reverse the other state or country’s adjustments to income as a result of its allowance of additional deductions or expenses. Include a copy of Form W-2 that shows the amount of compensation taxed by the other state or country. If Form W-2 does not show the amount of income subject to tax in the other state or country, a supplementary statement must be included illustrating how the compensation for the other state or country was determined.

UNREIMBURSED BUSINESS EXPENSES

Line 2b

Column A. If Line 2a, Column A is completed and the taxpayer or spouse claimed unreimbursed business expenses, enter the amount of unreimbursed business expenses from Line 1b of the PA-40. Enter only the unreimbursed business attributable to the name at the top of the PA Schedule G-L. Otherwise leave this line blank.

Column B. No entry is required.

Column C. No entry is required.

NET COMPENSATION

Line 2c

Column A. Subtract Line 2b from Line 2a. Enter the result here.

Column B. Enter the amount from Line 2a.

Column C. Compare Column A with Column B and enter the lesser of the two amounts here. A taxpayer or spouse cannot claim more compensation subject to tax in other states or countries than each has separately subject to tax in PA. If more than one PA Schedule G-L reports compensation subject to tax in more than one other state or country for a taxpayer or spouse, you must add the amounts subject to tax in the other states and countries for each and compare that amount to the amount of compensation subject to tax in PA. If the total of Line 2c, Column B for all states exceeds the amount in Line 1c of the PA-40 for the name of the person shown on the top of the Schedule G-L, you must make an adjustment to the amount reported on Line 2c, Column C for one of the states or countries so that the total does not exceed the amount subject to tax in PA. If you have made an adjustment as a result of excess compensation subject to tax in other states or countries, you must see the instructions for and complete, Line 4d.

INTEREST AND DIVIDENDS

Lines 2d and 2e

Column A. If you are claiming a resident credit for taxes paid on foreign interest and/or dividend income, enter the total amounts of interest and/or dividend income subject to tax in PA on Lines 2d and/or 2e from Lines 2 and 3 of your PA-40 return. You cannot claim a resident credit for taxes paid to another state for interest and dividend income. If you have interest or dividend income earned by a business or rental property that is subject to tax in another state, that interest or dividend income must be classified as Net Income or Loss from the Operation of a Business, Profession, or Farm or as Net Income or Loss from Rents, Royalties, Patents and Copyrights in PA to be able to claim a resident credit on that income. See the PA PIT Guide, Chapter 11, Section I, 3, for additional information regarding the Allocation of Noncommercial Interest, Noncommercial Dividends, and Gain to Net Income or Loss from the Operation of a Business, Profession or Farm.

Column B. If you have interest and/or dividend income subject to tax in another country, enter the interest or dividend income subject to tax in the other country on the respective lines. You may combine amounts of income and taxes from various countries and include it all on one PA Schedule G-L. However, you must include a separate statement to illustrate the income and taxes paid for each country in order to receive credit for the combined amounts reported. You must also calculate the allowable credit on a country-by-country basis on this statement prior to entering the amounts on the PA Schedule G-L. The statement showing the amounts of income, tax paid and credit calculated on a country-by-country basis may show the name of stock, type of income or transaction taxed in lieu of the country’s name.

CAUTION: If you claim a credit for taxes paid to a foreign country on interest and/or dividend income, that income must be classified as interest and/or dividend income in PA to claim the income on these lines of the PA Schedule G-L.

Column C. Compare the amounts from Columns A and B. Enter the lesser of the two amounts here.

NET INCOME FROM THE OPERATION OF A BUSINESS, PROFESSION OR FARM

Line 2f

Column A. If you are claiming a credit as a result of net income from the operation of a business, profession or farm subject to tax in another state or country, enter the amount from PA-40 Line 4. Although a taxpayer and spouse may file a joint return, they must complete separate PA Schedules G-L and report only the income attributable to the name at the top of the PA Schedule G-L.

Column B. If you have net income from the operation of a business, profession or farm subject to tax in another state or country, enter the amount of income from the other state or country’s return. Do not reverse the other state or country’s adjustments to income as a result of its allowance of additional deductions or expenses. In order to determine if the credit is allowable, taxpayers and their spouses must complete the worksheet in Part II to show the sources and amounts of income subject to tax for each state and source, even if from only one source. If any entity (PA Schedule C, partnership, limited liability company, S-corp, joint venture) was jointly owned, enter only the taxpayer’s or spouse’s portion of the income from the operation of a business, profession or farm subject to tax in the other state or country. To claim the credit for the spouse, you must file a separate PA Schedule G-L.

Column C. Compare Column A with Column B and enter the lesser of the two amounts here. If either amount is a (loss), enter zero in Column C. If you have other income or losses from the operation of a business, profession or farm that result in a net loss or that reduce your income in PA to an amount less than that subject to tax in the other state or country, the amount of credit can only be calculated on the amount of income subject to tax in PA. A taxpayer or spouse cannot claim more income from the operation of a business, profession or farm subject to tax in other states or countries than each has separately subject to tax in PA. If more than one PA Schedule G-L reports income from the operation of a business, profession or farm subject to tax in more than one other state or country, you must add the amounts of income subject to tax in the other states and countries for each and compare that amount to the income subject to tax in PA. If the total of Line 2f, Column B for all states exceeds the amount included in Line 4 of the PA-40 for the name of the person shown on the top of the Schedule G-L, you must make an adjustment to the amount reported on Line 2f, Column C for one of the states or countries so that the total does not exceed the amount subject to tax in PA for either the taxpayer or spouse. If you have made an adjustment to income as a result of excess income from the operation of a business, profession or farm subject to tax in other states or countries, you must see the instructions for and complete, Line 4d.

GAIN FROM THE SALE, EXCHANGE OR DISPOSITION OF PROPERTY

Line 2g

Column A. If you are claiming a credit as a result of a gain from the sale, exchange or disposition of tangible property subject to tax in another state or country, enter the amount from PA-40 Line 5. Although a taxpayer and spouse may file a joint return, they must complete separate PA Schedules G-L and report only those gains attributable to the name at the top of the PA Schedule G-L.

Column B. If you have a gain from the sale, exchange or disposition of tangible property subject to tax in another state or country, enter the amount of gain from the other state or country’s return. Do not reverse the other state or country’s adjustments to income as a result of its allowance of additional deductions or expenses. In order to determine if the credit is allowable, you must also complete the worksheet in Part II to show the sources and amounts of the income subject to tax for each state or country and source, even if from only one source. If the property sold was jointly owned, enter only the taxpayer’s or spouse’s portion of the gain subject to tax in the other state or country. To claim the credit for the spouse, you must file a separate PA Schedule G-L.

Column C. Compare Column A with Column B and enter the lesser of the two amounts here. If either amount is a (loss), enter zero in Column C. If you have other gains or losses from sales of other tangible or intangible property that result in a net loss or that reduce your income in PA to an amount less than that subject to tax in the other state or country, the amount of credit can only be calculated on the amount of income subject to tax in PA. A taxpayer or spouse cannot claim more income from the sale, exchange or disposition of property subject to tax in other states or countries than each has separately subject to tax in PA. If more than one PA Schedule G-L reports income from the sale, exchange or disposition of property subject to tax in more than one other state or country, you must add the amounts of income subject to tax in the otherstates and countries for each and compare that amount to the income subject to tax in PA. If the total of Line 2g, Column B for all states exceeds the amount included in Line 5 of the PA-40 for the name of the person shown on the top of the Schedule G-L, you must make an adjustment to the amount reported on Line 2g, Column C for one of the states or countries so that the total does not exceed the amount subject to tax in PA for either the taxpayer or spouse. If you have made an adjustment to income as a result of excess income from the sale, exchange or disposition of property being subject to tax in other states or countries, you must see the instructions for and complete, Line 4d.

INCOME FROM RENTS, ROYALTIES, PATENTS OR COPYRIGHTS

Line 2h

Column A. If you have income from rents, royalties, patents or copyrights subject to tax in another state or country, enter the amount from PA-40 Line 6. Although a taxpayer and spouse may file a joint return, they must complete separate Schedules G-L and report only the income attributable to the name at the top of the PA Schedule G-L.

Column B. If you have income from rents, royalties, patents or copyrights subject to tax in another state or country, enter the amount of income from the other state or country’s return. Do not reverse the other state or country’s adjustments to income as a result of its allowance of additional deductions or expenses. In order to determine if the credit is allowable, taxpayers and their spouses must complete the worksheet in Part II to show the sources and amounts of the income subject to tax for each state and source, even if from only one source. If the entity (rental property, partnership, limited liability company, S-corp, joint venture) from which the income is reported was jointly owned, enter only the taxpayer’s or spouse’s portion of the income subject to tax in the other state or country. To claim the credit for the spouse, you must file a separate PA Schedule G-L.

Column C. Compare Column A with Column B and enter the lesser of the two amounts here. If either amount is a (loss), enter zero in Column C. If you have other income or losses from rents, royalties, patents or copyrights that result in a net loss or that reduce your income in PA to an amount less than that subject to tax in the other state or country, the amount of credit can only be calculated on the amount of income subject to tax in PA. A taxpayer or spouse cannot claim more income from rents, royalties, patents or copyrights subject to tax in other states or countries than each has separately subject to tax in PA. If more than one PA Schedule G-L reports income from rents, royalties, patents or copyrights subject to tax in more than one other state or country, you must add the amounts of income subject to tax in the other states and countries for each and compare that amount to the income subject to tax in PA. If the total of Line 2h, Column B for all states exceeds the amount included in Line 6 of the PA-40 for the name of the person shown on the top of the Schedule G-L, you must make an adjustment to the amount reported on Line 2h, Column C for one of the states or countries so that the total does not exceed the amount subject to tax in PA for either the taxpayer or spouse. If you have made an adjustment to income as a result of excess income from rents, royalties, patents or copyrights being subject to tax in other states or countries, you must see the instructions for and complete, Line 4d.

ESTATE OR TRUST INCOME

Line 2i

Column A. If you have estate or trust income subject to tax in another state or country, enter the amount from PA-40 Line 7. Although a taxpayer and spouse may file a joint return, they must complete separate PA Schedules G-L and report only the income attributable to the name at the top of the PA Schedule G-L.

Column B. If you have estate or trust income subject to tax in another state or country, enter the amount of income from the other state or country’s return. Do not reverse the other state or country’s adjustments to income as a result of its allowance of additional deductions or expenses. In order to determine if the credit is allowable, taxpayers and their spouses must complete the worksheet in Part II to show the sources and amounts of the income subject to tax for each state and trust, even if from only one trust. If the trust from which the income is reported was jointly owned, enter only the taxpayer’s or spouse’s portion of the income subject to tax in the other state or country. To claim the credit for the spouse, you must file a separate PA Schedule G-L.

Column C. Compare Column A with Column B and enter the lesser of the two amounts here.

CAUTION: If the trust in which you are a beneficiary is required to file a return for another state or country and include the income as the trust’s income rather than the beneficiary’s income, you cannot claim a credit for the income taxes paid by the trust on your personal income tax return. The credit can only be claimed on a PA resident trust tax return. Taxes paid to foreign countries on interest and dividend income can also only be claimed on the PA resident trust tax return.

GAMBLING AND LOTTERY WINNINGS

Line 2j

Column A. If you have income from gambling and lottery winnings subject to tax in another state or country, enter the amount from PA-40 Line 8. Although a taxpayer and spouse may file a joint return, they must complete separate Schedules G-L and report only the income attributable to the name at the top of the PA Schedule G-L.

Column B. If you have income from gambling and lottery winnings subject to tax in another state or country, enter the amount of income from the other state or country’s return. Do not reverse the other state or country’s adjustments to income as a result of its allowance of additional deductions or expenses. In order to determine if the credit is allowable, taxpayers and their spouses must complete the worksheet in Part II to show the sources and amounts of the income subject to tax for each state and source, even if from only one source. A taxpayer and spouse must report their gambling and lottery winnings income and taxes paid to other states on such income on separate PA Schedule G-L forms. To claim the credit for a spouse, you must file a separate PA Schedule G-L.

Column C. Compare Column A with Column B and enter the lesser of the two amounts here. If either amount is a (loss), enter zero in Column C. If you have other income or losses from gambling activities that result in a net loss or that reduce your income in PA to an amount less than that subject to tax in the other state or country, the amount of credit can only be calculated on the amount of income subject to tax in PA. A taxpayer or spouse cannot claim more gambling or lottery winnings subject to tax in other states or countries than each has separately subject to tax in PA. If more than one PA Schedule G-L reports gambling or lottery winnings subject to tax in more than one other state or country, you must add the amounts of income subject to tax in the other states and countries for each and compare that amount to the income subject to tax in PA. If the total of Line 2j, Column B for all states exceeds the amount included in Line 8 of the PA-40 for the name of the person shown on the top of the Schedule G-L, you must make an adjustment to the amount reported on Line 2j, Column C for one of the states or countries so that the total does not exceed the amount subject to tax in PA for either the taxpayer or spouse. If you have made an adjustment to income as a result of excess gambling and lottery winnings being subject to tax in other states or countries, you must see the instructions for and complete, Line 4d.

NOTE: Individual taxpayers must add lines 2c through 2j of Column B and enter the total on PA Schedule G-R, in Column C on one of Lines 1 through 20. Losses may be offset against gains in this total as long as the offsetting is allowed in the other state or country. Estates and trusts must total the allowable credit from Line 6 of all PA Schedules G-S and/or G-L and enter the total on Line 13 of Form PA-41, the fiduciary income tax return.

Line 3

Add the amounts on Lines 2c thru 2j for Column C and enter the result here. If you have amounts on Lines 2d and/or 2e for Column C, you should not have any amounts on Lines 2c, 2f, 2g, 2h or 2j for Column C unless the amounts on the Lines 2d and 2e for Column C are from one country (“Various” not reported on Line 1) and are from the same country as the amounts for Lines 2c, 2f, 2g, 2h or 2j for Column C.

Line 4a

Enter the amount of income tax reported to the other state or country as due and payable before any credits for taxes withheld, estimated tax payments or other payments are taken into account. This amount is generally the tax liability as determined on the other state’s return. However, any special tax credits awarded or claimed must be used to reduce this amount.

Line 4b

Enter the amount of income tax actually paid to the other state or country in the form of estimated taxes, withholding taxes, extension payments and other payments (additional assessments of taxes). Other payments include payments that you intend to make with the filing of the return if there is a balance due after the application of estimated taxes, withholding taxes and extension payments. If you do not make the payment of taxes due with the return or do not intend to make the payment, do not include the balance due on the return with this amount.

NOTE: For individual taxpayers, the amount on Line 4b of each PA Schedule G-L should be carried to PA Schedule G-R, in Column D on one of Lines 1 through 20.

Line 4c

Enter the lesser of Line 4a or 4b.

Line 4d

If a taxpayer has more income subject to tax in the other state or country than in one or more of the PA classes of income or the combined income subject to tax in all the states or countries in which there is income subject to tax is greater than the income subject to tax in one or more PA classes of income, an adjustment to the amount of tax paid to the other state is required. Also, if another state or country had income on which there was no tax paid in Pennsylvania or on which the amount of income subject to tax in Pennsylvania was reduced due to other losses that were not permitted or attributable to the other state or country, an adjustment would be required to reduce the amount of tax paid to the other country to reflect the proportionate tax paid on the income subject to tax in both states. For example, if the income subject to tax in the other state or country for net income from a business, profession or farm is more than the amount of the PA-40 net income from a business, profession, or farm (Line 2f, Column B is more than Line 2f, Column A), an adjustment is required for Line 4c. Complete the Worksheet for Adjusted Tax Paid in Other States or Countries in Part III of the PA Schedule G-L to determine the amount of adjustment required to taxes. Enter the amount from Part III, Line 5.

Line 4e

Subtract Line 4d from Line 4c. Enter the result here.

Line 5

Multiply Line 3 by 3.07 percent (0.0307). Enter the result here.

Line 6

Enter the lesser of Line 4e or Line 5 here. Individual taxpayers must enter this amount on PA Schedule G-R, in Column E on one of Lines 1 through 20. Estates and trusts must total the allowable credit from Line 6 of all PA Schedules G-S and/or G-L and enter the total on Line 13 of Form PA-41, the fiduciary income tax return.

Example: Mary has compensation of $210,000 in PA. She claims $40,000 of unreimbursed business expenses in PA. She also belongs to an employer-sponsored retirement or 401k plan and contributes $10,000 to the plan. Mary also has three rental properties on which she reports income and losses. She reports income from Property A of $50,000, a loss on Property B of ($80,000) and income from Property C of $50,000. Her net income or loss from rents, royalties, patents and copyrights in PA is therefore $20,000. Mary’s regular work duties require her to be in Kentucky 90 percent of the time. Property C is also located in Kentucky, while Properties A and B are located in PA. On Mary’s Kentucky tax return, she includes a total of $230,000 of income [$180,000 (total PA compensation less 401k plan contribution x 90 percent) of compensation and $50,000 of rental income] and pays tax of $6,500. Mary is permitted to report only $170,000 on line 2c, Column C of her PA Schedule G-L ($210,000 PA Gross Compensation minus $40,000 UE expenses). Furthermore, she is permitted to show only $20,000 of rental income on Line 2h, Column C (net PA rental income). Mary must also make proportionate adjustments in the amount of taxes paid to account for these reductions. The adjustment to taxes would be determined by taking the total of Part 1 Column C, Line 3 ($190,000) and dividing it by Part 1, Column B Lines 2c through 2j ($230,000). This fraction is then subtracted from 1.000000 and the result is multiplied by the tax paid to arrive at the adjustment to taxes. Therefore, the proportionate reduction or adjustment in taxes required would be $1,130 [(1.00000 minus $190,000/$230,000) or 0.173913 times $6,500 = $1,130]. Her Kentucky PA Schedule G-L Line 3 would show $190,000 of income subject to tax in both states, which is made up of $170,000 of compensation (the maximum amount on which a credit can be claimed due to the reduction in PA income as a result of unreimbursed business expenses) and $20,000 of rental income (the maximum amount on which a credit can be claimed due to the net loss on PA properties not allowable in Kentucky). PA Schedule G-L Lines 4a, 4b and 4c would show $6,500. Lines 4d and 4e would show $1,130 and $5,370, respectively. Line 5 of PA Schedule G-L would show $5,833 ($190,000 times 3.07 percent = $5,833). Line 6 is limited to the lesser of Lines 4e or Line 5 and would be $5,370. The maximum resident credit Mary could claim for Kentucky would be $5,370.

Part II - Instructions for the Worksheet for Sources and Amounts of Income Subject to Tax in Other States or Countries

Line 1. Enter the name of the company, partnership, limited liability company, S corporation, rental property, trust, casino or gambling operation (collectively henceforth known as source) for each source having income or loss attributable to the state or country shown on Part I, Line 1. Include the name of a separate source in Columns A thru D. Include additional worksheets if additional columns are needed to report the income from additional sources.

Line 2. Enter the amount of income or loss for each class of income attributable to each source shown on Line 1, Columns A thru D. Add the amounts in Columns A thru D for each class of income and enter the total for each class in Column E. The amount listed in Part II, Line 2, Column E must agree with the amounts shown for each corresponding class of income in Part I, Lines 2c thru 2j, Column B. Include additional worksheets if more columns are needed to report the income from additional sources. Classes of income reported from PA S corporations, partnerships or limited liability companies (entities) should be provided to each shareholder, partner or member. Copies of the statements from entities are also required to be included with the return.

Part III - Instructions for the Worksheet for Adjusted Tax Paid in Other States or Countries

Line 1. Enter the amount from Part I, Column C, Line 3 here.

Line 2. Add the amounts from Part I, Column B, Lines 2c through 2j. Enter theresult here.

Line 3. Divide the amount on Line 1 by the amount on Line 2. Calculate the amount to six decimal places. If the result of dividing Line 1 by Line 2 equals 1.000000, you are not required to make an adjustment to taxes. You do not have to complete Lines 4 and 5 of this section. Stop here and enter “0” on Part I, Line 4d.

Line 4. Subtract Line 3 from 1.000000. Calculate the amount to six decimal places.

Line 5. Multiply the amount on Part III, Line 4 by the amount on Part I, Line 4c. Enter the result here and on Part I, Line 4d.

SPECIAL INSTRUCTIONS FOR TAXPAYERS REPORTING AMOUNTS ON PA-40 LINE 10, OTHER DEDUCTIONS

For taxpayers with amounts reported on Line 10, Other Deductions, amounts listed in Column A for Lines 2c through 2j must be reduced accordingly by a pro-rata amount of the deduction attributable to the taxpayer or spouse claiming the credit.