NJ Resident with Rentals in TX/TN. Do I need to report the rental income/loss in NJ

[j-ong]

I am a resident of NJ and own single-family rentals in TX/TN.

Do I need to report the income/loss on my NJ state filings?

TurboTax automatically records these activities on my NJ returns.  I spoke to a CPA and was advised that the income/loss from my rentals in TX/TN should not be reported on my NJ returns.

Now I am confused.

[rjs]

CORRECTED ANSWER

As a New Jersey resident you have to report all of your income on your New Jersey tax return, no matter where the income is from. TurboTax is doing it correctly.

If you have a net loss from all all of your rentals combined, it will show as zero or blank on your NJ-1040. You cannot claim a net loss in an income category on the New Jersey return. But you still have to list the profit or loss from each individual rental property.

You might have misunderstood what the CPA said, particularly with regard to losses. Otherwise, you need to consult a different tax professional. Not all CPAs are tax experts.

[rjs]

@j-ong  I have corrected the answer that I posted earlier. Please return to the TurboTax community to read the corrected answer. The correction is that rental income or loss is a separate income category. It is not combined with business income. But the basic answer to your question is the same. You have to report your rental income or loss on your New Jersey tax return, even if the net is a loss. TurboTax is reporting it correctly.

[j-ong]

Thanks @rjs 

I understand the situation for rental income now.

Can you please clarify further the situation when it comes to rental loss?

Example:

	Property A	Property B
State	TN	TX
Rents Received	$  10,000.00	$    7,000.00
Expenses (including depreciation)	$(30,000.00)	$(17,000.00)
Loss	$(20,000.00)	$(10,000.00)
Total Loss	$                          (30,000.00)

Currently, TurboTax is recording a Total Loss of -$30,000 under NJ-BUS1 - Part IV Net Gains or Income From Rents.

The CPA who reviewed my TurboTax return said that I should remove Properties A and B from my NJ returns (specifically remove them under NJ-BUS1/NJ-BUS2) because:

1.  It's a net loss

2.  These properties are not in NJ

He added if my rentals generated net income later on, it may become an issue because it would offset these losses.

Appreciate your insights on this matter.

[rjs]

The New Jersey instructions for Schedule NJ-BUS-1 Part IV say to enter the information "for each source of income or loss." I think that makes it pretty clear that a property with a net loss should be included. The instructions also say to enter the "gain or (loss) from each type of property." And the form itself says that line 4 is "net income or (loss)." So they obviously intend a net loss to be entered.

There is nothing in the instructions to indicate that it makes any difference whether the property is in New Jersey or another state. As I said yesterday, because you are a New Jersey resident you have to report all of your income on your New Jersey tax return, no matter where the income is from.

If properties A and B are your only rental properties, it obviously will not make any difference in your tax if you omit them, since the net loss becomes zero on Form NJ-1040. But I think it's clear that New Jersey expects the out-of-state properties with losses to be shown on Schedule NJ-BUS-1.

I don't understand the comment about future gains offsetting these 2023 losses. That doesn't happen on the New Jersey tax return because losses are not carried over. But if the CPA thinks that omitting the properties "may become an issue" in the future, then why take a chance of creating an issue?