How do I treat a business in a second state that had a loss in 2023? TT is calculating the losses and deducting them from my home state return.

[c_lorenzo-forens]

I work from home in Maryland and own a sole prop business. I also own a single member LLC that only does business in NY but still operated out of home office in MD. The NY LLC is new in 2023. I had startup costs and operation costs that ended the year in a loss for that business. When I input the business, TT is deducting them from my Maryland return. Since the business was done on behalf of the NY business, shouldn't it only be deducted on the NY return and if so , how do I do that in TT. Thanks

[ThomasM125]

Just as Maryland will tax the income earned in other states, you can deduct losses incurred in other states on your Maryland tax return. If you had income in New York, you would pay a tax on that income in Maryland, but would then be allowed to deduct the income tax you paid in New York from your Maryland tax. So, you are allowed to deduct the loss sustained in New York on your Maryland tax return.

[c_lorenzo-forens]

Thank you. In my Maryland state return, TT is asking for the double taxed income (which is negative $6k) and the tax paid do New York State (which is zero since I had a loss of $6k). How would I determine that tax paid to NYS when it is a negative number? 

[DMarkM1 · Accepted solution]

You and TurboTax have already figured the tax paid to another state, it's zero.  So there will not be a credit on your resident MD return for taxes paid to another state (NY).  Just confirm/enter the negative income and zero tax paid to NY.  

Typically, when there is income and it is taxed by a non-resident state that income is double taxed by your resident state.  In those instances the resident state offers a credit for taxes paid to another state to mitigate the double taxation.  However, since you have a loss and thus no income taxed by NY there will be no credit to claim on your MD resident return. 

Note:  The income loss is already taken on your resident return as it automatically transfers from your federal entries in the "Wages & Income" section, the self-employment/business topic to your resident return.