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Non-resident rental income state tax treatment

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  • Non-resident rental income state tax treatment

    If you invest in a deal in another state (whether a property, farmland, etc via a crowdfunded platform or access fund) that receives rental income, how does that state determine which bracket you are taxed at as a non-resident? Do they look at only the money you made in their state, or do they take into consideration your overall federal taxable income?

    For example looking at California which has a very progressive system, say your federal/resident state (not CA) taxable income is $500K but you earn $5,000 of rental income in CA. Are you taxed at 1% (up to $17,864 taxable income in CA) or at 9.3% (corresponding to the bracket around $500K)?

    Thanks!

  • #2
    Have you filled out the state tax return in that given state?

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    • #3
      Originally posted by ENT Doc View Post
      Have you filled out the state tax return in that given state?
      No this isn’t for 2020 so I’m not in this situation yet. I’m thinking ahead as I’m considering investing in syndicated properties or farmland. The impact on investment income returns is quite different depending on how the state taxes you so just trying to understand the implications of this for planning purposes.

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      • #4
        Each state is different. Some will consider all income, no matter where it was earned, and then tax you at their highest marginal rate.

        We complete multiple state returns each year, but the out of state returns show depreciation deductions that lead to paper losses. So for us, no income tax is owed out of state.

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