Sold rental property in another State at a loss. Do I complete the State tax form for that State?

[thepep]

I live in NJ and had a small rental property in PA.  I sold the rental Property last year at a large loss and overall net loss. Of course I completed a Federal tax form and NJ State tax form.  Do i need to complete a PA State tax form?

If so and I order it from TurboTax, will the Program know what to do? ie transfer whatever information and complete it?

[KatrinaB · Accepted solution]

Yes, you must file a Pennsylvania nonresident return. According to the Pennsylvania Department of Revenue, Nonresident taxpayers are only taxed on their Pennsylvania-source income. Therefore, only transactions displaying net gains and losses on tangible property located within Pennsylvania are required to be reported on PA Schedule D. Examples of dispositions of property required to be reported by a nonresident include sales of rental property located in Pennsylvania.

TurboTax can handle a nonresident state return. The information from the sale of your rental property will flow from the federal return to the state return. You will need to prepare your Pennsylvania return before your New Jersey return. 

Follow the directions in the TurboTax FAQ below to complete your nonresident state return,

https://ttlc.intuit.com/replies/3302052

The state of Pennsylvania allows married couples to file as married filing separately instead of jointly. You should file as married filing separately on your state return since the rental income is only in one spouse's name.

[Edited 04/10/2018 I 10:51 PM]

[thepep]

Before getting your answer, I partially completed my NJ (resident) return.  Should I stop that now and start on the PA (non-resident) form or is there another recommended procedure?

[KatrinaB]

That will be fine.

[thepep]

One last question:  My Federal and NJ State return were filed as "married filing jointly".  The PA property was in my name alone so all transactions did not involve my wife.  Should my Filing Status on the PA return also be Married Filing Jointly?

[KatrinaB]

Yes, you should. I have added information to my answer above.

[thepep]

Thank you. Am I required to submit a W-2 with the PA return?  Under "Special Pennsylvania W-2 Situations", "You earned income in another State" is checked off.  This is correct and I assume it refers to my resident State of NJ?

[KatrinaB]

You're welcome! Yes, it is correct and refers to your NJ return. If you file by mail, you need to include your W-2 that includes the state of PA in box 15. The W-2 for other states do not need to be included.

[thepep]

You meant State of NJ in Box 15 right?  That's whats on my W-2

[thepep]

I completed the review of the PA non-resident form, with your help.  It automatically transferred Stock Sales onto Schedule D of the PA form.  Should this have been done or should I delete them from the PA Non-Resident Schedule D?  My stock sales are reported on the Federal and NJ State forms.  It's telling me to check an ownership box for each stock sale.  IF my stock sales are required to be listed on the PA Non-Resident form, I'm not sure to check off "Taxpayer" ie me or "Joint" as those sales were done and filed under the Federal/NJ State Returns as Married Filing Jointly while the PA form is Married Filing Separately per your above response

[KatrinaB]

Let me research that quickly.

[KatrinaB]

I was referring to your NJ W-2 in my prior response. Those capital gains are not taxable on the PA return and should not be listed. You will need to go through the state interview again and allocate all income to NJ except for the rental sale. This may be a headache, but it is the only way to fix it.