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WSO
Level 3

Louisiana Non-resident Tax Rules for interest & dividends exempt from Federal Tax

I would appreciate validation that the instructions for Line 13 of the Louisiana non-resident/part time resident worksheet do NOT require me ( a non-LA resident who never even visited Louisiana) to include as income federally tax exempt interest/dividends earned in other states as part of my Louisiana income.     

 

The Louisiana worksheet instructions for line 13 are "Interest income and dividends not reported on your federal return are taxable to Louisiana, if ALL of the following conditions are met: a) the interest and dividends were earned while you were domiciled in Louisiana; b) the interest and dividends were received from obligations of a state or political subdivision of a state other than Louisiana; and c) the obligations were purchased on or after January 1, 1980. Obligations of the State of Louisiana, its political subdivisions, or public corporations created by them and their constituted authorities are exempt from Louisiana taxes. If you have nontaxable interest or dividend income on Federal Form 1040A, Lines 8b or 9b, or Federal Form 1040, Lines 8b or 9b, add the amounts together and print the result in the box on Line 13 under the Louisiana column:"

 

The wording of the first and last sentences above are confusing.  Is it correct to assume the last sentence above doesn't apply if I was never "domiciled" in Louisiana, that I don't have to add non-taxable interest listed on my federal 1040 into line 13 of the Louis?     I would think Louisiana would have no "legal right" to tax my federal non taxable interest shown on 1040 which was earned in other states if I am a NON-RESIDENT of Louisiana (and never was domiciled there) .  I am only filing a non-resident form in Louisiana because I had $26 of income on a K-1 from a LLC commercial property.  

 

Link to instructions is http://www.revenue.louisiana.gov/taxforms/IT540Bi(07).pdf

I  am a non-resident of Louisiana (with no domicile in Louisiana).  I received a K-1 from LLC with $50 in rental income

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Accepted Solutions
WSO
Level 3

Louisiana Non-resident Tax Rules for interest & dividends exempt from Federal Tax

Question resolved.  Louisiana updated their non-resident instructions.  Current Form IT-540B Instructions can be found at https://revenue.louisiana.gov/TaxForms/IT540Bi(2021).pdf    It clearly states that non-resident tax exempt int/div does NOT meet criteria to be included in block 13 as Louisiana income.

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3 Replies
WSO
Level 3

Louisiana Non-resident Tax Rules for interest & dividends exempt from Federal Tax

Question resolved.  Louisiana updated their non-resident instructions.  Current Form IT-540B Instructions can be found at https://revenue.louisiana.gov/TaxForms/IT540Bi(2021).pdf    It clearly states that non-resident tax exempt int/div does NOT meet criteria to be included in block 13 as Louisiana income.

Louisiana Non-resident Tax Rules for interest & dividends exempt from Federal Tax

Hi,  I moved from Louisiana to Texas on 7/15/2022.  I am completing my state tax form in Turbotax the state tax form is asking me if interest dividends and gains are subject to Louisiana tax.  I see no guidance in the program on how to do this and i do not understand why it is asking me vs. allocating like it did on my earned income.  I cannot find information for the 2022 tax year for LA on how to manage interest, dividends or gains as far as LA income or if i am to prorate the total for partial time of residency in the tax or set to zero.  How is this supposed to be managed for the state filing?

BillM223
Expert Alumni

Louisiana Non-resident Tax Rules for interest & dividends exempt from Federal Tax

You generally pay tax to the state where you live and to the state(s) where you earned income.

 

In your case, you lived in Louisiana in the first half of the year, thus, generally, you would report dividends, interest, and gains earned while you lived in Louisiana (note: The interest and dividends were received from obligations of a state or political subdivision of a state other than Louisiana. Obligations of the State of Louisiana, its political subdivisions, or public corporations created by them and their constituted authorities are exempt from Louisiana taxes, so don't include these in your Louisiana income). 

 

Thus, if the interest and dividends were reported only at the end of the year, you would prorate them for much time you lived in Louisiana (assuming they were taxable, as note above). You can prorate based on number of days (note this in your tax files, in case anyone ever asks).

 

If the capital gains were because of a specific sale (like a stock sale), then the gain belongs to the state where you were living at the time of the sale. Otherwise prorate the gains as above.

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