K-1 from LLC incorporated in state without state income tax

[rootsmusic]

I received a Schedule K-1 from a LLC that was incorporated in a state without state income tax, where all of the LLC's income was earned.  I'm filing form 1040 and a state tax return in the state where I live.  Should I make any state adjustments to the Schedule K-1?  Thanks.

[DavidD66 · Accepted solution]

It depends on whether or not there is anything on the K-1 which is taxed differently on federal return and your state.  For instance, there could be bonus depreciation on your K-1 and your state may not recognize bonus depreciation.  You will need to review your state's instructions for additions to and subtractions from federal income.  

[rootsmusic]

@DavidD66, the Schedule K-1 didn't include any state schedule.  Since the Schedule K-1 was from a LLC incorporated in a state without state income tax, should the income that it earned within that state be taxable on my state's tax return?  Thanks.

[Rick19744]

Yes.  The general rule is that your resident state taxes all income regardless of where it was earned.

Then to avoid double tax, most states provide a credit for taxes paid in other states.  Since you were not taxed on this income in the other state, no need for any credit.