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Level 1

TX residents and have vacation rental property in NM.

We are TX residents and have a condo in NM we rent out as a vacation rental. 2019 was the first year we started renting this condo. Net income for this rental is exactly $0 according to calculation from TT federal side. When I run the TT state return for NM it shows I owe them $3093. It seems to be carrying over all of our income from the federal side, not just the rental income. No other income was earned in NM. How do I fix? 

5 Replies
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Expert Alumni

TX residents and have vacation rental property in NM.

You will need to allocate income within the New Mexico program to indicate that the only income earned in NM is the rental income, when you have income in future years.

 

However, since the net income was $0 you are not required to file the New Mexico return this year and you can safely delete it from TurboTax and ignore the numbers that you are currently seeing. 

 

You may, if you wish, file the zero return just to record that you are accepting the rental income and currently have no profit to show - some folks are simply more comfortable doing it this way and there is no harm in doing it this way.  If you opt to do this for 2019, it is often easiest with nonresident state returns to clear them and begin fresh. Otherwise, they can be a little quirky sometimes.  

 

To do this simply click Delete beside the state return, then add it back in.  When you go through the return, take a little extra time to ensure that you allocate only the income to New Mexico that is from the rental.  Sometimes the questions read in the affirmative "this income was earned here" and other times it reads in the negative "enter the income not earned in this state." so be sure that you take some extra time when you get to the income allocation sections to separate out all of the other income.

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Level 1

TX residents and have vacation rental property in NM.

Thank you for your answer! 

Before your response I spoke with another TT expert that also told me to not file NM taxes since our net income was 0. However, I am wondering about next year. We were not able to edit any of the info on the state return that was showing we owed $3K for NM. You mentioned fields like "this income was earned here" but never saw anything like that during the interview. Everything that did show amounts showed $0 but at the end we still owed a balance. How do I see all of the data for the state return that is being transferred from the federal return?

The TT expert said he would let the "engineers" know since he felt there was a bug in the program. He was supposed to let me know what they found but I haven't heard anything. 

In the meantime we have filed our federal and won't be filing anything for NM. Next year if I run into this problem I might have to use different software. 

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Expert Alumni

TX residents and have vacation rental property in NM.

It sounds as if there were some set-up questions that didn't allow TurboTax to treat your NM income as nonresident income and that it was counting all of your income as New Mexico income.  If the program is set-up for a nonresident return, it will provide you with the interview questions that allow you to allocate the income.  They look like this:

 

 

Next year, if you have any issues when filing just give us a call and we can connect to the screens with you and walk you right through it, if necessary, to make sure that your taxes are done right. 

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Level 15

TX residents and have vacation rental property in NM.

However, since the net income was $0 you are not required to file the New Mexico return this year

The reason I question this is because you still have to account for the depreciation on the state return don't you? I would think not filing the NM state return would cause a serious and potentially costly problem with depreciation recapture on the state return, in the tax year when the property is sold. 

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Level 1

TX residents and have vacation rental property in NM.

I had set it up such that it showed we were non-residents of NM.  I did see those fields in your screen shot but my amounts were all zeros. At the end it was still showing an amount owing of about $3K.