I have rental property in another state. do I need to file in both that state and my state of residence?

[user14363133]

Dear Turbotax team, I am PA resident. Received rental income from abroad (europe) and paid taxes in that country.  Should I report this income as taxable to PA state or as rents received from real estate located outside Pennsylvania, such rents are allocable to the jurisdiction where the property is located. And so not taxable in PA? please advice!

thank you

[MayaD]

You should report the income as PA source income. 

As a resident of Pennsylvania your income from all sources inside and outside of Pennsylvania is taxable and reportable.

If you did not maintain a permanent abode in Pennsylvania or spent less than 183 days in Pennsylvania only your income from a Pennsylvania source is taxable and reportable.

PA Department of Revenue

On you Federal you might be able to claim Foreign Tax Credit for taxes paid to the foreign country.

To claim the credit in TurboTax: Where do I enter the foreign tax credit (Form 1116) or deduction?

[user14363133]

Thank you for the links. 

But my understanding was that Rent income is considered a different income that has to be reported but not taxed IN PA based on this information: https://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Pages/Income-Loss-Rents-Roy...

(Allocation or Apportionment of Rents and Royalties paragraph)

It says it is not allocable to PA. if it is located outside of PA 

[BillM223]

In general, you report the income in your home state and on the state(s) where you work. This property in Europe is, in a sense, where you work (yes, I realize how complex that is). So you report it in both places.

So, how do you normally avoid double taxation? Simple, when you pay tax in the European country, you declare this tax on form 1116, which acts as a credit for US taxes.

Of course, we are speaking of Pennsylvania, not the US. While the system I describe above works for most states, it no longer works for Pennsylvania. Pennsylvania says, "Note: Act 2013-52 effective Jan. 1, 2014, eliminated the resident credit for personal income tax paid to foreign countries." See page 4 of PA PERSONAL INCOME TAX GUIDE DEDUCTIONS AND CREDITS.

So the issue is that the PA legislature eliminated the ability for you to avoid double taxation on your foreign rental property.

The quote you gave above in toto (as a whole) is "Allocation or Apportionment of Rents and Royalties from the Extraction of Minerals or from Copyrights and Patents". That is, for the extraction of minerals or from Copyrights and Patents. And your real estate in Europe is neither. So your quote does not apply.

A resident of Pennsylvania "is taxed on all of his or her taxable income whether it is received from sources inside or outside Pennsylvania." See How Residents are Taxed.