TX resident with CA rental property showing a loss - do I file?

[User ID 4993393]

I am a TX resident for 2021, non-resident of CA. In Sept 2021 I bought a rental property in CA as investment property, rented it for the remainder of 2021 and it shows a loss for 2021. Do I have to file a non-resident tax return for CA 2021 form 540NR since I did receive some rents paid to me or not, because overall it is a loss?

[tagteam · Accepted solution]

You might want to file a CA return if only to preserve the loss to be carried forward to future returns.

[Carl]

FYI - It is not all that common for long term residential rental real estate to show a taxable gain. It's more common to show a loss every single year. Those losses get carried over. So your carry over losses will grow with each passing year.

When you add up the deductible rental expenses of mortgage interest, property taxes, insurance and the depreciation you are required to take by law, those four items alone are usually enough to exceed the total rental income received for the year. Include with that other allowable rental expenses such as repairs, maintenance, etc., and you're almost guaranteed to show a loss every year.

I would highly suggest you include that on your non-resident state return so as to show the loss carry over to the state. Those carry over losses usually won't be realized until the tax year you sell the property and they will then come into play to reduce your taxable gain on the sale of the property in that year of sale.