I file Hawaii resident and California non-resident. I have one rental in CA and one in HI. The Fed return combines the two but the two state returns don't divide them. They use the Fed combine. How can I divide them.


First, your resident state, HI, gets to tax all of your income regardless of where it's from so you can't remove the CA rental from there.

The Calif nonresident/part-year return, Form 540NR, computes your income and tax as if you were a resident the entire year, then computes a net tax rate by dividing the total tax by total taxable income. Your California-source taxable income is then multiplied by that net tax rate to determine your California tax. You can see this on Form 540NR lines 31-37.

So you do report everything but towards the end of the interview (Adjustments to Income / Income and Expense Adjustments / Nonresident Adjustments) is where you allocate the California-source income which is multiplied by the net tax rate. See Form 540NR, lines 31 - 42 and Schedule CA(540NR).

So when the TT/Calif interview shows you the combined rental income(loss) for you to allocate, you need to enter the CA rental income(loss). All other income items on your federal return are non-Calif-source so you would enter 0 for those.

As TT/Amanda says, prepare the TT/Calif return first, then TT/HI so it can reach into the Calif return to grab the information it needs to prepare the Other State Tax Credit for some or all of the Calif tax due on that rental income that HI is also taxing.

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