1) You will pay VA taxes only on the income produced in VA. At present, based on your post, that would be only the rental income. You would file a VA non-resident return to report that rental income. There is no special form for that. YOu simply complete the VA non-resident state return. Understand that for states that tax personal income, the TurboTax state modules include both resident and non-resident forms for those states. So you don't need to concern yourself with anything special really.
2) Yes, you will report all income from all sources world-wide on your NY state return. However, a reciprical tax agreement exists among/between states that tax personal income. Therefore you will receive a credit on your NY state tax liability, for the taxes you pay to VA. Understand the credit may or may not be dollar for dollar. It just depends on the specifics of whatever reciprical tax agreement exists between NY and VA.
Overall, there is an extremely high probability that you will not be paying any taxes at all to VA if your only source of VA income is residential rental real estate. When it comes to filing taxes, it is not common for rental property to actually show a profit *on* *paper* at tax filing time. It is much more common for rental property to show a loss *on* *paper* at tax filing time. This is especially true if there is a mortgage on the property.
Generally speaking, once you add uo the deductible rental expenses of mortgage interest, property taxes, and insurance and add that to the depreciation you are required to take by law, those four items alone will be more than the total rent you collect for the entire year. THen when you include other deductible rental expenses such as repair and maintenance costs, you practically *guarranteed* to show a loss *ON* *PAPER* at tax filing time every year. So in the end, I would not expect you to pay *any* taxes on rental income to the state of VA, until the year you sell or otherwise dispose of that rental property in VA.
