I live in CA but own a rental home in AZ. I have a net loss for the house, do I still need to file in AZ?

[DS30]

No you will not need to file an AZ nonresident state income tax return if you have net losses on an AZ located rental property.

[momandan1012]

I live in California and I have two rental property’s in Arizona do I need to file a tax return in Arizona also

[maglib]

Actually you may have to file an AZ tax return.  The requirement is based on the Gross income not the net.   rules apply to all Arizona taxpayers.  See Page 7 https://azdor.gov/file/6919/download?token=DOQdMFXV
You may still need to file even if you had income taxes
withheld and paid to Arizona. See table below.
You must file if
you are:
and your Arizona
adjusted gross
income is at least:
or your gross
income is at
least:
x Single $ 5,500 $15,000
x Married filing
joint $11,000 $15,000
x Married filing
separate $ 5,500 $15,000
x Head of
household $ 5,500 $15,000
If you are a nonresident, you must report income derived
from Arizona sources.
To see if you have to file, figure your gross income the
same as you would figure your gross income for federal
income tax purposes. Then you should exclude income
Arizona law does not tax

[Carl]

Yes, you will file an AZ non-resident return. Otherwise, the state has no way of knowing you operated at a loss and 100% of the rents collected will be taxable by the state of AZ.

Note that it is *extremely* *rare* for rental income to ever actually show a taxable gain "on paper" when you do your taxes. When you add up the deductible rental expenses of mortgage interest, property taxes, and the depreciation you are required to take by law, that alone is usually enough to exceed your rental income for the year. Add to that the other deductible rental expenses you are allowed, and you're practically guaranteed to operate at a loss "on paper".  But if you don't file a return with AZ showing "on paper" that you operated at a loss, then as far as the state is concerned, 100% of your rental income is taxable.

[maglib]

after fully depreciating property, my rentals all start to show income on paper and why I buy new ones in 1031 exchanges or new ones with losses to offset gains...  I find poorer the area, the faster I end up showing gains especially when there are tax incentives to purchase...  Section 8 housing is very lucrative quickly although lots of headaches too.

[jcre168]

Hi, we live in California, have rental in arizona, after depreciation, at net loss, do we need to file income tax with AZ?

Thanks.

Chris 

[AmyC]

If your AZ income - before expenses, was $15,000 or more, you must file a non-resident AZ return.

@jcre168

[jcre168]

Thanks.

[AmyC]

You are welcome!

[RealityG]

If you collected rents totaling more than the filing threshold of $15,000, then YES, you must fill out AZ Form 140NR. I am in a similar situation and this is the response I got from the Arizona Dept of Revenue:

Arizona nonresidents earning income from Arizona sources and who meet the filing threshold are required to file a nonresident tax return (AZ Form 140NR).  Rental income from a property located in Arizona is considered income from Arizona sources.  If you are required to file a nonresident return, report the rental income on Form 140NR, line 21.  

Note:  Arizona does not allow individuals a adjustment to reduce current year income with net a operating loss carry forward utilized on the federal return.  

To determine if you meet the filing threshold for a nonresident see Form 140NR instructions, page 1) for the table listing the filing thresholds for each type of filing status. 

https://azdor.gov/forms/individual/arizona-nonresident-personal-income-tax-booklet 

It is based on gross income, not net, from your rental property. Hope this helps!

[I Watt]

Ok, I am in the same situation and understand that I have to file.  However, by looking at form 140NR, I need to fill in the gross rental income on line 21, but where do I fill in the operating expense?  I am very confused, is it on line 45 which corresponding to page 5 line G 'Net Operating Loss Adjustment' ?  Please help!

[maglib]

It flows from schedule E federal return.

[maglib]

see my prior answer. It depends on gross income, not net income.  If you gross more than $15k from Arizona sources you must file a nonresident return there.  Good luck.

[retire88]

According to form 140NR, AZ gross income is defined on line 26 and includes federal Schedule E income on line 21.

I purchased the AZ state tax and followed Turbotax's instructions on filling it out. I then looked at line 26 for the AZ gross income and it is less than $15000 so I do not meet the filing requirement.

I recommend everyone who is concerned do the same and keep it as a record.