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sshung
New Member

I live in WA but have rentals in CA and OR. Both included in federal return and transferred to State returns. How can I remove the OR property from nonresident CA return?

 
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Accepted Solutions
Zbucklyo
Level 9

I live in WA but have rentals in CA and OR. Both included in federal return and transferred to State returns. How can I remove the OR property from nonresident CA return?

Don't try to delete it from the CA tax return. It has to do with the way the CA calculates the tax owed for a non-resident.  The rate of California tax you pay is based on your total income from all sources, including what you earned in Washington, the rental in California, the rental in Oregon, and all other income.  This should all show up on your CA 540NR, Line 19, which determines your CA taxable income.  Line 32 should shows the adjusted gross income from only the CA rental, and Line 36 shows the tax rate applied to California income.  So, while you shouldn't be taxed on income from Oregon, that income still figures into how much CA tax you must pay.

The trick comes from entering things properly in Schedule CA (540NR), Line 17.  Column A is carried from your federal tax return.  Columns B and C are additions and subtractions as a result of differences in CA law and federal law.  Hopefully, they are blank.  If B and C are blank, column D should be the same as column A, and it is the amount of income from the rentals in both CA and OR.  The trick is getting column E correct.  This is the point at which you should exclude the OR rental, and treat the CA rental as a standalone property.  Enter the net income, or allowable loss here (if your income is high enough, you might have a suspended passive loss carryover from that rental alone, in which case you enter 0). 

Going forward, you need to track the carryover losses, if any, from the CA property separately from the Oregon property, offline.  This is a useful guide for dealing with CA as a non-resident:

https://www.ftb.ca.gov/forms/misc/1100.pdf


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4 Replies
Zbucklyo
Level 9

I live in WA but have rentals in CA and OR. Both included in federal return and transferred to State returns. How can I remove the OR property from nonresident CA return?

Don't try to delete it from the CA tax return. It has to do with the way the CA calculates the tax owed for a non-resident.  The rate of California tax you pay is based on your total income from all sources, including what you earned in Washington, the rental in California, the rental in Oregon, and all other income.  This should all show up on your CA 540NR, Line 19, which determines your CA taxable income.  Line 32 should shows the adjusted gross income from only the CA rental, and Line 36 shows the tax rate applied to California income.  So, while you shouldn't be taxed on income from Oregon, that income still figures into how much CA tax you must pay.

The trick comes from entering things properly in Schedule CA (540NR), Line 17.  Column A is carried from your federal tax return.  Columns B and C are additions and subtractions as a result of differences in CA law and federal law.  Hopefully, they are blank.  If B and C are blank, column D should be the same as column A, and it is the amount of income from the rentals in both CA and OR.  The trick is getting column E correct.  This is the point at which you should exclude the OR rental, and treat the CA rental as a standalone property.  Enter the net income, or allowable loss here (if your income is high enough, you might have a suspended passive loss carryover from that rental alone, in which case you enter 0). 

Going forward, you need to track the carryover losses, if any, from the CA property separately from the Oregon property, offline.  This is a useful guide for dealing with CA as a non-resident:

https://www.ftb.ca.gov/forms/misc/1100.pdf


View solution in original post

sshung
New Member

I live in WA but have rentals in CA and OR. Both included in federal return and transferred to State returns. How can I remove the OR property from nonresident CA return?

Thank you, Zbucklyo, for the detailed answer. Now I KNOW. Really appreciate your help.
Zbucklyo
Level 9

I live in WA but have rentals in CA and OR. Both included in federal return and transferred to State returns. How can I remove the OR property from nonresident CA return?

And by the way, if you have a loss on the CA property, assuming you have no other CA source income to deal with, you won't have any income to offset the loss, so it can be carried over.  
sshung
New Member

I live in WA but have rentals in CA and OR. Both included in federal return and transferred to State returns. How can I remove the OR property from nonresident CA return?

Good to know. Thanks again.
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