I got rental income from another state, do I have to file income tax for that state?

[VictoriaD75]

Generally, your resident state will tax all income regardless of where earned. You will receive a credit for taxes paid in another state.

A nonresident state will only tax the income earned in that state.

Include the rental activities on your Federal return, and it will carry to your state. It will likely affect your resident state if it is not subject to passive loss limitations and reduces your AGI.

There are several implications to placing a rental property in an LLC. You should speak to an attorney regarding your personal situation.

[cclemon]

Hi, I live in WA and have rentals in IN and CA.

CA rental property had net operating loss last year, but gain this year.

IN properties have net gains both last year and this year.

My federal return does not have net loss combined since IN properties offset loss from CA last year.

Question, when I file CA return this year, can I use net loss last year to offset this year's gain even though I don't have federal net loss for rentals.

I entered all the numbers in Turbo, but CA return still showing this year's gain. 

[jamianddaniel]

I'm a TX resident, do I need to file state taxes in CA on a rental property that I had a net loss on for the year?

[SusanY1]

California does not require you to file when you have a net loss.  However, you may still wish to do so in order to record the loss and to avoid notices from California asking for a return (which is pretty notorious in this regard.) 

@jamianddaniel

[CG350]

Hi, I’m a Florida resident with a rental home in Alabama (where I’m listed to retire for tax purposes). Should I file state taxes in Alabama if that property is a loss? Thank you. 

[Carl]

Long Term Residential Rental Real Estate will practically always operate at a loss *ON PAPER* at tax filing time. Especially if there is a mortgage on the property. When you add up the allowed rental deductions of mortgage interest, property taxes, insurance, and the depreciation  you are required to take by federal law, those four items alone are usually enough to exceed the total rental income you will receive for the entire tax year. Add to that you other allowed rental expenses (such as maintenance and repair) and you're practically guaranteed to operate at a loss.

In some situations once your rental expenses gets your taxable rental income to ZERO, that's it. You can't dedcut any more. Any remaining unused deductible rental expeness are carried over to the next year. So with each passing year you carry over expenses continue to grow and carry over. Those carry over losses can't be "realized" against other "ordinary" income until the tax year you sell the property. For some this will help reduce the taxability of any gain realized on the sale by a significant amount.

In other situations once your rental expenses exceed the rental income you are allowed to deduct a maximum of $25,000 against "other" ordinary income each year. Then any losses over $25K in a tax year just get carried forward to the next year.

Bottom line is, if the state taxes personal income and you don't file a state tax return with that state each and every year, then in the tax year you sell the property you will pay taxes to that state on every single penny of profit/gain you realized from that sale, because you have no carry over losses on past state tax returns you never filed, to deduct from that gain.

For short term rentals, most states that tax personal income also regulate short term rentals and not filing a tax return "WILL" get you audited. It may take a few years for the state to catch up to you. But when they do (note I said "when", not "if") the fines and penalties assessed will most likely not be cheap.

Additionally, of the short term rentals I'm aware of in my state of FL, none of them operate at a loss - though it's possible they will for 2020 having been shut down by the state due to the pandemic. Fortunately for those rentals in FL, the state does not tax personal income. However, every county I'm aware of in the state (we have 67 counties) they all impose a yearly licensing fee and/or a "bed tax" for every night a short term rental is occupied. Forget to file that with the county at the end of the year, and good luck renewing your license when the yearly renewal period approaches.

[Critter-3]

To those reading this thread in the future ... YES  you should file a non resident return if you have a rental property in a state that does have an income tax return  EVEN if you are not required to file due to income requirements   and  ESPECIALLY if the  property runs at a LOSS  to keep that information on the books so when the property is sold you have the loss on record.   Trying to prove the loss carryforward 20 years later could be a nightmare that the state could disallow.  

[phito85]

I live in California and plan to possibly purchase a rental property in Florida which have no income taxes. Since it appears I won't need to report any rental income in the state of Florida, I will be free of any tax liability for all the income generated there?  Thank you.

[Critter-3]

Correct ... if the rental is in a state with no income tax of course you will not have to file a state return there  however the rental is still taxable on your resident state return. 

[imobrn]

I live in Michigan and have a rental in Florida, but only rent it during the high season. I use it on and off the rest of the time. The tenants have to pay a 12% tax on the rental and, if I am doing it correctly, I include the rental income with my current income for that year. I don't file anything in Florida.  I use Turbo Tax to file.

[rbeck7771]

Thanks for your answer.  Since you use Turbo Tax, in the interview when it asks if you made income in another state, do you answer "yes"?

[rbeck7771]

...unless my resident state also does not have an income tax.  Correct?

[ThomasM125]

@rbeck7771 You would indicate that you earned income from another state whether your state had an income tax or not. However, you may not be required to file a tax return in the other state if your income there was below the minimum income filing requirement in that state, in which case you could answer "no."

[Jnramos4]

If the property is owned by an LLC, does this still apply? The LLC property is in FL but my LLC is in CA. My LLC is still fairly new (1yr old) and although there is rental income, the expenses were high and I did not pay myself at all through my LLC this year. So on my personal tax return I wouldn’t claim any income correct? The income would be listed in the FL (non residential) tax return or in the CA LLC tax return? Or both?

[GeorgeM777]

Whether your rental property is part of your limited liability company or not does not matter for tax purposes.  To the extent your earn rental income and incur rental expenses, you would still report that income and expenses on your federal return.  It appears you may be a resident of CA, and therefore, the amounts on your federal return regarding your rental property will transfer to your CA return.   

You indicated that your rental expenses are greater than your rental income, and therefore, you are correct in that you have no rental income subject to tax.  Assuming your rental income/loss is passive in nature, then your passive losses can only be used to offset passive income.  If your passive losses exceed your passive income, those losses will just carry over to the next year and will continue to carry over year after year until they are completely used up.  If your rental activities are such that you are a Real Estate Professional or if your rental activity can be fairly characterized as "active participation," you will have more options with regard to how you handle your rental losses.  TurboTax will ask you questions about your rental activities to determine the nature and character of those activities so that you get the best deductions. 

FL has no state income tax.   So there is no FL income tax return to complete with regard to your rental income.  However, FL does have a Sales and Tourist Tax.  The Sales and Tourist Tax is only applicable when you rent your property as a short term rental.  In this regard, rentals for 6 months or less are subject to a Florida State sales tax of 6%, a local tax of between .5% and 1% and also a County tourist tax (between 4% and 5%, depending on the County). You or your property management company will originally register for these, then each month, you must file and declare the rents you have charged. You must file monthly even if you have had no rents that month, otherwise you will be charged a penalty.  Sales and tourist taxes do not actually cost you anything, because you charge the tax to your guest and then remit this tax to the government.  Long term rentals (for more than 6 months to the same tenant) are not subject to sales and tourist tax.

FL also has a tangible personal property tax.  Any business owner or self-employed contractor owning tangible personal property on January 1st must file a return each year as required by Florida Statutes 193.052, and 193.062.  Property owners that loan, lease or rent tangible property to others must also report such property.  With regard to rental unit owners, furniture and fixtures in rental condominiums and apartments must be reported.