Question by Louise F: Virginia part-year tax return?
My son moved to CO in late July for school. He worked both in VA (earned under $ 3000)and CO. I am guessing that he should file part-year returns for both states. Right? Also, I was using a tax software for his part-year VA return, and on the return there were no entries for prorated personal exemption, prorated standard deduction (he is claimed on our return), or taxable income. Is that correct? I think there is a problem somewhere, unless there is something in VA’s code about low income.
Any help will be appreciated.
He is not still a VA resident. He registered to vote in CO, as well as changing his driver’s license. Because of this, would he still need to fill out part-year for both states? Also, any comment on the software results stated earlier?
He intends to stay in CO well after graduation.
As far as the software, when I input the tax info, the VA part-year form has “0” entries for standard deduction and personal exemption. Is the right? I think that the software is not handling the data correctly.
Answer by bostonianinmo
Assuming that he’s still a VA resident he does not file a part year return in VA. College students attending school in another state do NOT lose their residence in their home state, much in the same way that military personnel do not.
VA is entitled to tax his income from all sources world wide, including the income he earned in CO. He will get a credit for any CO taxes paid on his VA return, equal to the lower of the tax actually paid to CO or the tax that VA would levy on the income earned in CO.
He would file a part-year non-resident return for CO, showing only the income earned in CO.
Edit: VA is one of several states that vigorously defends the residency status of students and military. Should he return to VA once he completes his studies, VA will assess taxes for the time that he was out of the state, claiming that his change of residency was solely to avoid VA income taxes. They will win on this claim by the way. If he truly is a CO resident now, he should plan on NOT returning to VA for at least 6 months after graduation. 12 months would be better.
MA and CA are also infamous for this treatment of fomer residents who were students or military and claimed a change of domicile while in that status but returned to the state when they graduated (students) or separated (military).
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