Live in Illinois, Vacation Rental in Indiana How Do you Split

[cbusa]

If you live in Illinois and have vacation rental in Indiana do you file a part year return in both states? How do you split the income? (Income in Indiana is only from the vacation rental). When you stay at the vacation rental to manage the rental is this considered managing the rental 

[Mike9241]

you file a non-resident return for Indiana reporting only the rental and a full year Illinois return which would also include the rental. if you pay Indiana income taxes, you'll get a credit on the Illinois return. 

[rjs]

You are a full-year resident of Illinois, and a full-year nonresident of Indiana. There is no part-year residence, and no part-year tax returns are involved. Staying at your vacation home does not mean that you moved from Illinois to Indiana.

[cbusa]

Would only the income from the vacation rental in Indiana be considered Indiana income? Do the states base the income based on address listed on your w2 or how does that work?

[Mike9241]

rental real estate is taxed by both your state of domicile (Illinois) and the state where the property is located (indiana). I'm not sure what the filing requirements are for non-residents of Indiana

you can find the instructions for non-residents here

https://www.in.gov/dor/tax-forms/2021-individual-income-tax-forms/  

just like rental above a w-2 it's taxed by the state where you physically work and your state of domicile, if different, with some caveats.

they are:

a) some states have reciprocity with other states - you only pay taxes in the state of domicile. to avoid withholding or the need to file a return in the non-domicile state to get the taxes back withheld there is a form that can be filed with the employer. there is no reciprocity between Illinois and Indiana

b) telecommuting  - some states tax the wages of a taxpayer who works remotely from an out-of-state location

if you pay Indiana income tax you can claim a credit on your Illinois return 

[Opus 17]

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@cbusa wrote:

Would only the income from the vacation rental in Indiana be considered Indiana income? Do the states base the income based on address listed on your w2 or how does that work?

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In most cases, income is taxed where you actually physically live and/or work while performing the work, regardless of your mailing address.   If you have a work-from-home job, and you worked while staying at your vacation home (away from your main residence) that would also be considered Indiana-sourced income.

[TomD8]

TurboTax help topic on managing your own rental property:

https://turbotax.intuit.com/tax-tips/home-ownership/property-management-tax-deductions/L6QXTih0O