State Tax on Iowa Non Resident Income from Rental Property Loss

[dallasholv]

My spouse and I own a rental property in Iowa, and are non residents of Iowa.  We are residents of Florida which has no state income tax.  Our Iowa condo was rented all of 2024.  On our 2024 Federal return using Turbo Tax it shows -$4815 loss for the property which makes sense due to mortgage, insurance, HOA fees, expenses, depreciation, etc.  We have been at a loss on our Federal return every year since 2014.   In past years when I used Turbo Tax for Iowa it shows I owe Iowa about $750.  The same again this year.  I've tried other tax programs that transfer Federal data to Iowa and shows $0 due to Iowa after I enter my responses for Iowa.  We have no other income in Iowa.  

My understanding is that I should not be paying tax in Iowa on a rental property that is a loss every year and have no other income in Iowa.  Agree?  I would assume that is the same for other states - no tax due on rental property operating at a loss for non residents with no other income from the state.   

I've paid for Turbo Tax advice in the past.  The Turbo Tax experts I talked to stated that I shouldn't be paying tax on a rental property loss, but could never point me to how to come up with that result in Turbo Tax for Iowa.  I want to get this right to avoid surprises if I decide to sell the rental property someday.  I've looked at Iowa Form IA 126 but don't see how Turbo Tax translates numbers to the form.  

If I shouldn't be paying tax on a rental property loss, how can I get Turbo Tax to reflect no tax due for Iowa?  I only see 1 screen that asks what is my gross income for my rental property in Iowa.  I enter the rent amount received from the tentant with no other info to provide about rental expenses.  

What am I doing wrong?  What am I missing?

[MaryK4]

Did you have section 179 or bonus depreciation?  These are adjusted in Iowa so your federal loss may have been income with the adjustment.  

[dallasholv]

Hmm.  Not seeing section 179 or bonus depreciation.   I have been depreciating the rental property in Turbo Tax ever since starting to rent in 2014.  My Federal Returns in Turbo Tax only have Schedule E and form 8582 Passive Activity Loss Limitations.  We are not operating the rental as a business.   We are only infrequently contacting the tenant and that's about it for involvement.  

Where else can I look to see why Iowa is showing I owe tax on a rental property that is a loss year over year on my Federal return?

[dallasholv]

I have not resolved my issue.  Hoping I can get some more insight as to what might be going on - I'm entering the amounts incorrectly, or maybe there is a bug in TurboTax.

[KeshaH]

If you'd like, we can look at your return and see exactly what you see to help come to a resolution. The return will be scrubbed and won't include any of your personal details.

If you're using TurboTax Online:

Once you're logged in to your account and have your amended return open,

- on the left hand panel, click on Tax Tools and then choose Tools

- on the pop up window, select Share my file with Agent

- you'll see a message saying you'll give us a copy of your tax return. Your personal information will be changed so we can't see any private information.

- click okay and you'll get another message with a token

If you're using TurboTax Desktop:

• Click on Online in the top menu of TurboTax Desktop for Windows
• Select 'Send Tax File to Agent'
• Write down or send an image of your token number and state then place in this issue.
• We can then review your exact scenario for a solution

Please reply to this message with your token so that we can further assist you. Let us know all other states that are included on the return.

[dallasholv]

I paid for a Live Expert and got my answer.  The issue was that the Iowa state form asked for income received from the rental property.  There is no further information requested in the state form as far as expenses, depreciation, etc.  on the property.  The loss from Schedule E 1040 does not transfer to the Iowa state form.  In order to get the correct result (no tax on a loss) the solution was to copy/paste the Schedule E loss amount and put it in as a negative number in the rental income received box for the Iowa state form.  The result in TurboTax state form then shows $0 tax due for Iowa.   This post can be closed as resolved.