MD rental property

[zyx321]

My wife and I own a rental property in MD and, this year, we have been non-resident in MD the entire year, meaning that the rental property is sole source of MD income.  As you may expect, for federal tax purposes, the rental property produces a tax loss, much of which is carried forward year to year.  Is there anyway to show the tax loss to MD?  I understand that under some instruction, we may not technically be required to file, but it seems that in order to get the [future] withholding on any sale, the MD comptroller requires tax returns filed for each year it was a rental.  I'm happy to file an income tax return showing all 0s, but want to make sure we don't need to show MD the tax losses on the property.

[Carl]

but want to make sure we don't need to show MD the tax losses on the property.

If you don't file an MD tax return, then you're saying that all of your rental income received from your MD property is profit, and is therefore taxable by the state. The state comptroller will have an absolute field day with you on an audit. If lucky, the only thing you would have to pay the state would be the fines and penalties for not having filed a tax return. Such fines/penalties would probably be assessed for each tax year you didn't file too.

The only way to show the state that you do not have a taxable profit, is to file a state tax return. Period. End of Story. If you don't file a state return, then you are leaving the door open for the state to not only come after you, but to win.

This will really come into play in the tax year you sell the property. You need to show the state that you did "in fact" depreciate the property over the years (that would be on your federal return) and that you recaptured that depreciation. (recaptured depreciation is taxable income at both the federal and state level.)

You need to quit playing games and get all your returns filed before the July 15th deadline.

[zyx321]

I understand that I should file, but I was wondering if there was a way to show depreciation on the MD return, or do I just file a return that has all zeros (for MD income), as the property has a tax loss.

[zyx321]

To be very precise, MD Form 505, line 1 has the federal wage income and the amount of that attributable to MD wage income (which is 0).  Line 10 has the federal rent income - here it is zero because we have a passive tax loss we can't claim on the federal return (which is reflected on the Schedule E, but do I reflect that passive loss on the MD return and if so, how?  Or is the MD return all zeros? I just want to make sure I shouldn't show the loss on either the 505 or a different form (which Turbo Tax isn't picking up).