Need help understanding how to calculate Nonresidents taxable %

[jyeh74]

If you receive rental income from a state that you do not live in, are you supposed to pay taxes attributable to that state?  I was told no.  Nonresident Schedule PN to fill out.  Column A tells you to include all income from all sources.  Things like wages, salaries, taxable interest, taxable dividends, alimony, real estate rental etc.  There is an associated Column B that says "amount of Column A attributable to state"  Since that client does not live in that state, they have 0 for wages, salaries, taxable interest etc.  They only get rental income.  Let's say total annual rental income is $10,000 from all real estate rental income.  Let's say amount of real estate rental income for this particular state is $4,000. 

So would Column B be 0 or $4,000?  I can't imagine client pays nonresidence taxable 40% of their AGI, then multiplied by that state income tax %, as tax due if they only had rental income.

[JamesG1]

If you live in state A and own a rental property in state B, you may be required to file a state B nonresident tax return because the rental income was sourced to state B.

Much depends upon the reporting requirements of nonresident state B.

In your example, if the Federal 1040 tax return reports $10,000 in rental income, $6,000 is sourced to state A and $4,000 of the rental income is sourced to state B.

If you are required to file a nonresident state tax return to state B, you may owe state income tax to state B on the $4,000.  If that is the case, state A may permit you to take a credit on resident state tax return A for taxes paid to state B.

The general rule is to prepare the nonresident state tax return first, so that the software knows how much the nonresident state tax owed is and a credit for taxes paid to another state may be correctly computed.

See also here.

[jyeh74]

@JamesG1 

This is what the instructions say.

In Column B, enter the amount of Column A received from state sources or income received while a resident of that state.

So it depends on how you interpret it.  If you are looking at the first part of the sentence, the state rental income = $4000

But if you look at the last part of the sentence, since you were never a resident of that state = 0. 

See how confusing it is?  Someone else understand this?

[JamesG1]

The term ‘state sources’ when discussing rental income is generally accepted to mean that the rental real estate physically resides within the confines of that state.

So, I read the statement that the rental income is from state sources and attributed to that state regardless of whether I was a resident of that state.

The instructions you quoted do not refer to a specific state.  The laws of a specific state would rule the day.