Yes, if you have net rental income from a rental property located outside your home state, you will need to file a nonresident state income tax return in that other state (if you meet that nonresident states minimum filing requirements). This even applies to states with reciprocal agreements. (These reciprocal agreement do not cover rental income.)
You will also need to include this income on your resident state income tax return. You will get a state tax credit in your home state for any nonresident state taxes paid on income that is being taxed in both your resident and nonresident states.
You can add a state under the state taxes tab.
Just follow the TurboTax guide when working on your states (remembering to do your nonresident state return first) and TurboTax will do all the calculations and credits to your resident states return
Here is additional information about filing in multiple states (select "see more answer" to view the entire attachment)
https://ttlc.intuit.com/replies/3300797
What if you have a net loss on the property? example: my gross profit was 19K but my expenses total 26K resulting in a net loss. Do I still need to fill a return with the state the home is in?
Yes, in most states you would be required to file a tax return for gross income of $19,000 generated on rental property in the state.
Thanks for clarifying. Follow up - despite grossing over $19K, should I expect to pay taxes to that state despite a net rental loss? For example - the state is MI and their asking for $800 on a $6000 net loss.
In most cases you would not have to pay tax on a net loss on a State return.
When you file a nonresident MI return, you report all of your income, even income earned out of State.
You then allocate your income between MI income and other State Income.
Check your MI return to see if your out of state income has been allocated as out of state income.
Hi Robert, (@RobertG)
Does Turbotax offer the option of doing non-resident state tax returns if we have rental income in state(s) that we don't work/live in?
Thanks.
Yes, in the My Info section, there is a question "Did you make money in any other state?" (Other State Income) but if you missed it, you can always add in the State section (Add Another State)
Only if that state taxes personal income. For example, Florida does not tax personal income. So if your rental property is located in FL, you have nothing to report to that state concerning your rental income.
I am finding the same thing in Michigan. I have a loss of $9000 but including that loss reduced my refund by several hundred from Michigan. If I just put the income in with no loss, I get a refund of considerably more. Can't understand that!! I live in Michigan but the rental property with a loss is in Florida.
Also, why does Turbo Tax want me to download a Florida State tax form for $44.00 when I live in Michigan and Florida doesn't collect state taxes?
Hello RobertG,
I had a similar situation filing a non-resident IL return for rental property I own in that state. However, since there was a net loss, the IL tax return that TurboTax creates does not pick up the rental activity. So neither gross income nor net loss (to be carried forward) is captured in the IL-1040 or the supplemental forms.
How do I fix this?
You don't need to fix it. Illinois law follows federal law concerning passive activity income and losses.
Your loss will be captured on the federal side and will pass through to the Illinois return when you prepare next year's taxes.
Hi!! This is our first year living in New Jersey (we lived in DE for 17 years) and we have two rental properties in Delaware. I already filed our taxes with TurboTax and just realize nothing was done for Delaware. Do I need to amend my return? Both properties operate as a loss. One is a second home/rental. Thanks so much!
the rental property with a loss is in Florida.
Florida does not tax personal income and never has. YOu do not need to file a state tax return with the state of Florida, since no such form exists for doing so for the state of Florida.
Hello,
I have a similar situation as above. I just bought an investment home that I will use as short term rental property in Nevada. Nevada has no state income tax, and I currently live in West Virginia. The property will likely get a net loss this year as it will need to be set up and have some remodeling to do. When I file taxes for 2020, will the net loss in Nevada affect my taxes in West Virginia?
Do I or should I create an LLC for this property? Since the property will be operated and incur monthly expenses in Nevada even though I live in West Virginia would I need to file for LLC in Nevada or West Virginia?
Generally, your resident state will tax all income regardless of where earned. You will receive a credit for taxes paid in another state.
A nonresident state will only tax the income earned in that state.
Include the rental activities on your Federal return, and it will carry to your state. It will likely affect your resident state if it is not subject to passive loss limitations and reduces your AGI.
There are several implications to placing a rental property in an LLC. You should speak to an attorney regarding your personal situation.
Hi, I live in WA and have rentals in IN and CA.
CA rental property had net operating loss last year, but gain this year.
IN properties have net gains both last year and this year.
My federal return does not have net loss combined since IN properties offset loss from CA last year.
Question, when I file CA return this year, can I use net loss last year to offset this year's gain even though I don't have federal net loss for rentals.
I entered all the numbers in Turbo, but CA return still showing this year's gain.
I'm a TX resident, do I need to file state taxes in CA on a rental property that I had a net loss on for the year?
California does not require you to file when you have a net loss. However, you may still wish to do so in order to record the loss and to avoid notices from California asking for a return (which is pretty notorious in this regard.)
Hi, I’m a Florida resident with a rental home in Alabama (where I’m listed to retire for tax purposes). Should I file state taxes in Alabama if that property is a loss? Thank you.
Long Term Residential Rental Real Estate will practically always operate at a loss *ON PAPER* at tax filing time. Especially if there is a mortgage on the property. When you add up the allowed rental deductions of mortgage interest, property taxes, insurance, and the depreciation you are required to take by federal law, those four items alone are usually enough to exceed the total rental income you will receive for the entire tax year. Add to that you other allowed rental expenses (such as maintenance and repair) and you're practically guaranteed to operate at a loss.
In some situations once your rental expenses gets your taxable rental income to ZERO, that's it. You can't dedcut any more. Any remaining unused deductible rental expeness are carried over to the next year. So with each passing year you carry over expenses continue to grow and carry over. Those carry over losses can't be "realized" against other "ordinary" income until the tax year you sell the property. For some this will help reduce the taxability of any gain realized on the sale by a significant amount.
In other situations once your rental expenses exceed the rental income you are allowed to deduct a maximum of $25,000 against "other" ordinary income each year. Then any losses over $25K in a tax year just get carried forward to the next year.
Bottom line is, if the state taxes personal income and you don't file a state tax return with that state each and every year, then in the tax year you sell the property you will pay taxes to that state on every single penny of profit/gain you realized from that sale, because you have no carry over losses on past state tax returns you never filed, to deduct from that gain.
For short term rentals, most states that tax personal income also regulate short term rentals and not filing a tax return "WILL" get you audited. It may take a few years for the state to catch up to you. But when they do (note I said "when", not "if") the fines and penalties assessed will most likely not be cheap.
Additionally, of the short term rentals I'm aware of in my state of FL, none of them operate at a loss - though it's possible they will for 2020 having been shut down by the state due to the pandemic. Fortunately for those rentals in FL, the state does not tax personal income. However, every county I'm aware of in the state (we have 67 counties) they all impose a yearly licensing fee and/or a "bed tax" for every night a short term rental is occupied. Forget to file that with the county at the end of the year, and good luck renewing your license when the yearly renewal period approaches.
To those reading this thread in the future ... YES you should file a non resident return if you have a rental property in a state that does have an income tax return EVEN if you are not required to file due to income requirements and ESPECIALLY if the property runs at a LOSS to keep that information on the books so when the property is sold you have the loss on record. Trying to prove the loss carryforward 20 years later could be a nightmare that the state could disallow.
I live in California and plan to possibly purchase a rental property in Florida which have no income taxes. Since it appears I won't need to report any rental income in the state of Florida, I will be free of any tax liability for all the income generated there? Thank you.
Correct ... if the rental is in a state with no income tax of course you will not have to file a state return there however the rental is still taxable on your resident state return.
I live in Michigan and have a rental in Florida, but only rent it during the high season. I use it on and off the rest of the time. The tenants have to pay a 12% tax on the rental and, if I am doing it correctly, I include the rental income with my current income for that year. I don't file anything in Florida. I use Turbo Tax to file.