Overview

A tax credit is allowed to an individual who is a resident of North Carolina for tax imposed by and paid to another state or country on income that is also taxed by North Carolina.

The taxpayer may qualify for the North Carolina Foreign Tax credit if they earned income and were taxed in another state or country, and that same income was also taxed by North Carolina. The taxpayer must be able to provide and attach proof of taxes paid, such as a copy of the other state or country's tax return or documentation showing the tax was witheld.

Taxes paid to cities, counties, other local governments, or the federal government do not qualify.

Some countries collect income tax through paycheck withholding instead of requiring a tax return. In these cases, North Carolina will generally accept documentation showing the tax was withheld as proof of payment.

See instructions for D-400TC for more information.

To enter the Foreign Tax Credit on a North Carolina Return, follow the steps below:

1. Navigate to the State tab.

2. From the list of states, click North Carolina.

3. Click the Credits tab.

4. Select TC1 Credit for Taxes Paid to Other States from the list.

5. Select the state or country from the dropdown list, and enter the taxes paid.

The amounts should flow to line 16 of the NC return.