To receive the Oklahoma Credit for Tax Paid to Another State, you must be a resident or part-year resident of Oklahoma who earned income from personal services performed in another state, and that other state taxed the income. You are required to report the full amount of such income on your Oklahoma state tax return (Form 511 or Form 511-NR for part-year residents).
Eligibility Requirements
- Resident Taxpayers: Must report the full amount of qualifying personal-service income on Form 511 and have paid qualifying income tax on that income to another state.
- Part-Year Residents: Must have received qualifying income from personal services performed in another state while an Oklahoma resident, report the full amount of such income in the “Oklahoma Amount” column of Form 511-NR, and have paid qualifying income tax to another state on that income. Personal-service income not included in the “Oklahoma Amount” column does not qualify for this credit.
- Non-Eligible Cases: A nonresident taxpayer does not qualify for this credit. A taxpayer who has claimed a credit for taxes paid to another state on the other state’s income tax return does not qualify to claim this Oklahoma credit based on the same income. The credit is otherwise allowed only for qualifying net income tax legally imposed and paid to another state on income that is also taxed by Oklahoma, and is subject to the limitations and requirements provided in the Oklahoma Form 511-TX instructions.
How to Calculate the Credit
- Complete Form 511-TX to determine the allowable credit. The form calculates a percentage limitation by dividing qualifying personal-service income taxed by both states by Oklahoma Adjusted Gross Income. That percentage is applied to Oklahoma income tax to determine the limitation amount. The allowable credit is the lesser of the limitation amount or the qualifying tax paid to the other state.
- When determining the tax paid to the other state, include only the portion of the other state's tax attributable to the qualifying personal-service income reported on Form 511-TX, line 1. Do not use the state income tax withholding shown on Form W-2.
- For example, if the other state's return includes wages and other income, only the portion of the other state's tax attributable to the qualifying wages or other personal-service income may be used in calculating the Oklahoma credit.
How to Claim the Credit
- Complete Form 511-TX, Credit for Tax Paid to Another State.
- If taxes were paid to more than one state, complete a separate Form 511-TX for each state.
- Attach a complete copy of the other state's income tax return, including W-2s and required supporting documentation.
- If the other state does not allow a return to be filed for gambling winnings, such as Mississippi in the example provided by the Oklahoma Tax Commission, attach Form W-2G instead.
- Enter the allowable credit from Form 511-TX, line 7 on Form 511, line 16, or Form 511-NR, line 19, as applicable.
Claiming via Tax Software
- In online tax software, navigate to the State section and select Oklahoma.
- Under Credits, answer “yes” to “Did you pay income taxes to any additional states?”
- Select Schedule 511-TX and follow on-screen instructions to complete the form.
Source:
Form 511
Form 511-TX
Disclaimer: Always verify details with the official Oklahoma Department of Revenue forms and instructions. This guidance is based on current information and may not cover all individual circumstances. For complex situations, consult a CPA or tax professional.