I have a rental property loss of $3813 in 2018. In the Oregon tax return,passive activity loss: 1) why is federal set to $0? 2) should I go ahead and put $3813 in Oregon?

[Ashby]

If your income is over $150,000, you cannot deduct passive activity losses. They are suspended and carried forward until you dispose of the property.

[ekilada]

Thank you. Yes, my income is above $150K. Does that mean in the Oregon Tax return -> passive activity losses difference, I should put $0 in both the federal and Oregon fields? I thought I should put the correct loss value in the Oregon field, and TurboTax would calculate automatically what can actually be deducted. I see an increase in my return when I do that.

[Ashby]

Oregon follows the federal rules applying to passive losses, so you should not put anything in the passive activity losses difference. That is an incorrect override.

[ekilada]

Awesome, thanks! I will remove it then!

[plawlor78]

@Ashby what if only some of my K-1s apply to Oregon, and I am a resident of California? Should I put 0 for the K-1s that have property outside of Oregon?

[MarilynG1]

No, you should enter your K-1's as received in your Federal return.  Here's more info on Entering Form K-1.  

If you had Oregon income or paid tax there, in the California interview, you can make adjustments for those amounts that don't belong to CA.

@plawlor78 

[plawlor78]

@MarilynG1 I did enter the federal K-1 as received in the federal k-1.

I also enter the states K-1s for states as received. I only modify the the California tax return if I received a California K-1 that tells me there are adjustments. Otherwise, I leave them alone. Are you telling me that I should be adjusting the California even if I don't get a California K-1?

[MarilynG1]

No, you're doing it correctly!  If you end up filing a non-resident return for rental income and paid tax there, you would have a credit for out of state tax paid on your California return. 

@plawlor78 

[plawlor78]

Thanks @MarilynG1. I'm less sure about entering the information into the nonresident K-1s for Oregon, Montana, and Missouri. The interview and the forms don't seem to quite match. Any information on how to fill those out correctly? 

[MarilynG1]

If you enter the K-1s in the federal interview, the income from those K-1s will automatically transfer to your state returns - in the appropriate income categories (e.g. Ordinary business income, Rental Real Estate Income, Dividends, Interest, etc.). After entering in your Federal return, prepare your non-resident states. Make sure that you indicate you 'earned income in other states' in the Personal Info section. 

If there are differences in the federal and state K-1s, you must see what the difference is so that you can determine if it is necessary to make changes to the state return to reflect the differences.  Sometimes, depending on what the difference is, the state return will have an "adjustment" question or section in the state return to enter the differences.

You will generally find a difference in the state and federal K-1s when the state doesn't comply with certain federal tax provisions, so there may have to be an adjustment.  With Rental Income, it might be a depreciation deduction.

You may not be required to file in Oregon, Montana, and Missouri, depending on filing requirements.  Some states want you to report all income (even losses) and others don't. 

Sorry I can't help with specific screens in state returns, but here's some info on State K-1's.  If the interview and forms don't match, you can make adjustments directly on the forms.

@plawlor78 

[plawlor78]

Thanks @MarilynG1 

I'll play around with TurboTax some more to see if I can figure it out. 

The reason that I want to file in  the nonresident states is that I have losses that I want to carryover to future years. From my understanding (in Oregon at least), you are supposed to file it you want to carryforward passive losses from K-1s. Do you agree?

[MarilynG1]

Found this at Oregon Public Law site:

"Modifications of Passive Losses by a Nonresident: In the case of a nonresident, losses resulting from passive activities derived from or connected with Oregon sources as defined in ORS 316.127 (Income of nonresident from Oregon sources) are deductible for Oregon purposes, subject to the provisions of IRC Section 469. The loss is modified by the modifications, additions and subtractions provided for in ORS Chapters 314 and 316 allocable to the passive activity. Sections (2) and (4) of this rule shall be followed regarding which additions, subtractions and modifications are allocable and how the transition rules and passive activity credits are applied. Section (7) of this rule shall be followed regarding the computation of the Oregon passive activity loss.

Example: John is a nonresident of Oregon and has rental property in both Oregon and California. His loss from all rentals is $50,000 and from his Oregon rental $10,000. Federal law allows a deduction of up to $25,000 for rentals. John would show $25,000 loss in the federal column of Form 40N and $10,000 loss in the Oregon column of Form 40N. John claims the $10,000 loss for Oregon because the loss for a nonresident from Oregon sources is treated in the same manner as a passive loss for a full-year resident."

@plawlor78