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birddog55
New Member

I live in California. Had a loss on my rental in Arizona and we sold it mid year for a profit, why is there no tax due for Arizona

I did the Federal  and California tax part and just finished the Arizona.

I owe on both Federal and California but Arizona is zero.

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DanielV01
Expert Alumni

I live in California. Had a loss on my rental in Arizona and we sold it mid year for a profit, why is there no tax due for Arizona

That could be correct.  California and Arizona have a unique tax arrangement as reverse credit states.  Normally when you live in one state and work in (or generate income from) another state, you are taxed first in the nonresident state, and then you are given a credit for the amount of tax you pay in that state on your resident state's return.  But with CA and AZ, it is the opposite.  Your nonresident state, AZ, will give you a credit for the tax you pay to CA on the income you are generating in AZ.

And since you are reporting both a gain and a loss in Arizona, it is possible you don't have any tax there anyways.  But if you do have a taxable amount in AZ, you still would not pay any tax there if the tax you pay on the equivalent CA income is as much as or more than the AZ tax on that same income.  

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1 Reply
DanielV01
Expert Alumni

I live in California. Had a loss on my rental in Arizona and we sold it mid year for a profit, why is there no tax due for Arizona

That could be correct.  California and Arizona have a unique tax arrangement as reverse credit states.  Normally when you live in one state and work in (or generate income from) another state, you are taxed first in the nonresident state, and then you are given a credit for the amount of tax you pay in that state on your resident state's return.  But with CA and AZ, it is the opposite.  Your nonresident state, AZ, will give you a credit for the tax you pay to CA on the income you are generating in AZ.

And since you are reporting both a gain and a loss in Arizona, it is possible you don't have any tax there anyways.  But if you do have a taxable amount in AZ, you still would not pay any tax there if the tax you pay on the equivalent CA income is as much as or more than the AZ tax on that same income.  

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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