Yes, Alabama allows resident individuals to claim a tax credit for income taxes imposed by other states. This credit is claimed on Form 40, Schedule CR. A copy of the other state’s return and a copy of the state Schedule K-1 should be included as documentation of this credit.
If the individual does not file an individual income tax return in the other state or the state provides an exclusion of income, include a proforma return calculating the tax at the other state’s rate and a copy of the state Schedule K-1 as documentation of this credit.
Note: Any Pass-Through Entity tax deducted on the Pass-Through Entity’s federal return, which reduces the taxable income reported on the owner’s K-1, should be added back to compute Alabama taxable income.