Rental Income in a non resident state and business income from residential state

[jmagann]

I have a rental property outside of my home state. I also run a small personal business in my home state. Do I need to pay tax on that income in the non-resident state? I feel like something is miscategorized, because TT is forcing me to fill out a form for the non-resident state on that business income. 

[DavidS127 · Accepted solution]

You typically are required to file a nonresident tax return when you have a business or rental property in a state where you do not reside.

But, the nonresident tax return should only calculate taxes on the income related to that state.  And, you typically get a credit on your resident tax return for the tax you pay to the nonresident state on "the same dollar of income".

When you complete the nonresident return, you'll be asked which income is related to that nonresident state, and only that income will be used in the tax calculation.  But, depending on the state, sometimes the nonresident state will calculate tax based on your total income, and then "pro-rate" the tax based on the percentage of nonresident income to your total income.  So, it sometimes looks as if you are being taxed on your total income in the nonresident state, until you get to the "pro-ration" calculation.

If your question is not resolved, more information about the states involved may help resolve your issue.