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Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

 
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1 Best answer

Accepted Solutions
TomD8
Level 15

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

Your resident state can tax you on ALL your income, regardless of where you earn it.  Other states can tax you as a non-resident on income you earn within their borders, such as rental income from a property located there.  So you must report your rental income to both states.  You'll be able to take a credit on your home state return for tax you pay to the non-resident state, so you won't be double-taxed.

In TurboTax, it's recommended that you complete your returns in this sequence:

1.  Federal

2.  Non-resident state

3.  Resident state

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

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8 Replies

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

"Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?"

I don't understand the question.  If you own a rental property and have mortgage on it, then YOU are MAKING MORTGAGE PAYMENTS.  Why are you asking about mortgage payments as income?

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

You mean the rent payments?  That cover the mortgage?  And By the way, you can't deduct the mortgage payments, just the interest paid.  You should be depreciating the cost of the rental over time which takes care of the principal part of he mortgage.

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

In which state is the rental property located?

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

Sorry for the confusion.  I'll try to clarify a bit.  I own a rental property out of my resident state.  The tenant makes monthly payment which I show as income.  I'm wondering if I can present the income to my resident state so I'm not double taxed by both resident and non-res state regarding the rental income.  Hope this helps.

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

Look at TomD8's answer below.  You'll report the income, (actually, more likely a loss after depreciation), in both states.  IF you happen to have income in the non-resident state and are assessed tax on that income, then you take a credit on your resident state income tax return for the tax paid to the non-resident state.  (At least, that's how most states handle this situation).  The credit more or less eliminates the "double taxation" issue.
TomD8
Level 15

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

Your resident state can tax you on ALL your income, regardless of where you earn it.  Other states can tax you as a non-resident on income you earn within their borders, such as rental income from a property located there.  So you must report your rental income to both states.  You'll be able to take a credit on your home state return for tax you pay to the non-resident state, so you won't be double-taxed.

In TurboTax, it's recommended that you complete your returns in this sequence:

1.  Federal

2.  Non-resident state

3.  Resident state

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Carl
Level 15

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

Rental income (every penny of it) is reportable on your tax return. What you use that income for is irrelevant. You must claim it all as the income it is.

Now as you work through the SCH E you'll see that from that income you can claim/deduct property insurance, mortgage Interest, Mortgage Insurance, property taxes, and much more. But what you receive is not in any way, form or fashion considered mortgage income by any taxing authority at any level of government. It's considered passive rental income. All of it.

Should I reflect full mortgage income as taxable income to my resident state, if the rental property is located in non-resident state?

I think OP is asking which state he needs to claim it in?
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