No you will not need to file an AZ nonresident state income tax return if you have net losses on an AZ located rental property.
I live in California and I have two rental property’s in Arizona do I need to file a tax return in Arizona also
Actually you may have to file an AZ tax return. The requirement is based on the Gross income not the net. rules apply to all Arizona taxpayers. See Page 7 https://azdor.gov/file/6919/download?token=DOQdMFXV
You may still need to file even if you had income taxes
withheld and paid to Arizona. See table below.
You must file if
you are:
and your Arizona
adjusted gross
income is at least:
or your gross
income is at
least:
x Single $ 5,500 $15,000
x Married filing
joint $11,000 $15,000
x Married filing
separate $ 5,500 $15,000
x Head of
household $ 5,500 $15,000
If you are a nonresident, you must report income derived
from Arizona sources.
To see if you have to file, figure your gross income the
same as you would figure your gross income for federal
income tax purposes. Then you should exclude income
Arizona law does not tax
Yes, you will file an AZ non-resident return. Otherwise, the state has no way of knowing you operated at a loss and 100% of the rents collected will be taxable by the state of AZ.
Note that it is *extremely* *rare* for rental income to ever actually show a taxable gain "on paper" when you do your taxes. When you add up the deductible rental expenses of mortgage interest, property taxes, and the depreciation you are required to take by law, that alone is usually enough to exceed your rental income for the year. Add to that the other deductible rental expenses you are allowed, and you're practically guaranteed to operate at a loss "on paper". But if you don't file a return with AZ showing "on paper" that you operated at a loss, then as far as the state is concerned, 100% of your rental income is taxable.
after fully depreciating property, my rentals all start to show income on paper and why I buy new ones in 1031 exchanges or new ones with losses to offset gains... I find poorer the area, the faster I end up showing gains especially when there are tax incentives to purchase... Section 8 housing is very lucrative quickly although lots of headaches too.
Hi, we live in California, have rental in arizona, after depreciation, at net loss, do we need to file income tax with AZ?
Thanks.
Chris
If your AZ income - before expenses, was $15,000 or more, you must file a non-resident AZ return.
Ok, I am in the same situation and understand that I have to file. However, by looking at form 140NR, I need to fill in the gross rental income on line 21, but where do I fill in the operating expense? I am very confused, is it on line 45 which corresponding to page 5 line G 'Net Operating Loss Adjustment' ? Please help!
see my prior answer. It depends on gross income, not net income. If you gross more than $15k from Arizona sources you must file a nonresident return there. Good luck.
According to form 140NR, AZ gross income is defined on line 26 and includes federal Schedule E income on line 21.
I purchased the AZ state tax and followed Turbotax's instructions on filling it out. I then looked at line 26 for the AZ gross income and it is less than $15000 so I do not meet the filing requirement.
I recommend everyone who is concerned do the same and keep it as a record.
I highly recommend everyone to file the non resident returns even if not required to do so to keep the ongoing record of the losses on the books with the state ... less headaches later when you dispose of the property and the state refuses to acknowledge the carry forward losses.