If you live in state A and own a rental property in state B, you may be required to file a state B nonresident tax return because the rental income was sourced to state B.
Much depends upon the reporting requirements of nonresident state B.
In your example, if the Federal 1040 tax return reports $10,000 in rental income, $6,000 is sourced to state A and $4,000 of the rental income is sourced to state B.
If you are required to file a nonresident state tax return to state B, you may owe state income tax to state B on the $4,000. If that is the case, state A may permit you to take a credit on resident state tax return A for taxes paid to state B.
The general rule is to prepare the nonresident state tax return first, so that the software knows how much the nonresident state tax owed is and a credit for taxes paid to another state may be correctly computed.
See also here.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
