The gains and losses are from a rental property in another state. When I enter the income in the resident state entry for out-of-state income, my refund for that state INCREASES. Then, when I enter the losses it goes the other way and I owe the resident state money. This seems backwards to me. Is this correct and why?
This is correct. The reason is that your resident state does not consider the gains or losses that were attributed to another state. Your resident state only wants to tax income or recognize losses generated within that state.
When you enter the income from the other state (gains) into your resident state return, you are reducing your resident state income because the income from the other state is being subtracted. Therefore, your resident state refund will go up since the taxable income was less.
When you then enter the losses from the other state into your resident state return, you are increasing your resident state income because the losses from the other state is being added. If the loss was not generated in your resident state, then it cannot be used to reduce your resident state taxable income, therefore the loss is added to the resident state income. This means the taxable income would increase and your refund/balance due would change accordingly.
Thank you Annette, I just want to make sure I am understanding you. My resident state is Oklahoma and the state with the rental property is Florida. The rental is not profit motivated, we rented it just so we could hang onto it and never made a month's profit (case and point, we just moved back into it). We had no assets in it either. Since FL has no state income tax and there are no assets, I am not filing a FL return.
So, I should enter the FL income in OK's out-of-state income and and the total FL losses in OK out-of-state losses?
You described how things are added and subtracted, but I am still confused as to why losses in FL, which I am not filing a return in, means that OK should charge me more taxes.