Rental Loss not transferring to state

[ahsuster]

I have a rental loss in a state where I am a non resident.  This home is the only source of income for that state.  On the Federal return, it cannot be used as a deduction since our overall income is over the required amount.  When I enter the info for this state (CT), $0 is listed from the federal form.  I can manually type in the loss amount, however it doesn't appear to transfer the loss details that are calculated on the federal form.  What can I do to include this information with the state return?  Also, do I even need to file this state return since it is a loss, and our only source of "income"?  Thank you.

[DanielV01 · Accepted solution]

It depends on the state.  When you have a rental loss as the only "income" from the state, the states vary as to whether or not such income must be reported.  Generally speaking, if you do not have any income (and a reported loss translates to no income), then you technically might not have to file, but may still choose to do so.  Most (but not all) states do not have a separate "rental loss" provision to carry the loss forward to future years.  Part of the reason is that the rental loss is accompanied by gain of other income.  That other gain may not be taxable to the state, but removes a claimable Net Operating Loss to report to the state.

And that may explain why you don't see the negative number carrying forward.  It is likely that a negative number has no tax significance in CT (and may not even be allowed).  They will receive a copy of the Schedule E that will show the rental loss regardless.  And you may not be technically required to file, but may still choose to do so so that in a year you have rental gain, the state does not question why you didn't file anything.