Thank you for the reply. To clarify, I am a Michigan resident:
1. I have one property in a state where there is no state income tax. I have net rental income from that property but there is no state income tax to pay.
2. I have one property in a state where there is state income tax. I have net rental loss from that property and there is no state income to pay since I have a rental loss.
3. Rental income/loss on both properties are reported on federal schedule E, and the combined total on schedule is a gain.
I actually have these properties for some years, and in the past I did not know that I maybe able to subtract the gains from Michigan state income until now for tax year 2024. I found the following instruction on Michigan Schedule 1 Additions and Subtractions.
The instructions for Line 4 Schedule 1 - Loss attributable to other states (Additions section) says the following:
"enter losses from a business or property located in another state which you own as a sole proprietor, a partner in a partnership, a shareholder in an S corporation, or as a member of a pass-through entity". I am not in any of these categories. I own the properties as an individual and do not have a formal "business" structure. So it doesn't appear that I need to add back the rent loss.
The instructions for Line 13 Schedule 1 - Income attributable to another state (Subtractions section) says: "Michigan residents cannot subtract salaries.....However, they maybe entitled to a tax credit for income tax imposed by government units outside of Michigan. Residents may subtract, to the extent included in AGI: Net business income earned in other states (which I do not own a business); Net rents and royalties from real property...located or used in another state.". I have net rental income from a rental property in a state where there is no income tax. So it appears that I am not entitled to a tax credit for income tax imposed by govt units outside of Michigan since this other state does not have income tax.
So it appears that:
1. I don't have to add "rental loss" on a rental house in the Additions section since I am an individual and don't have a "business".
2. I am not entitled to subtract "rental income" on a rental house in the state where there is no income tax.
Please advise. Thank you.
