How to File Tax on Rental Property in a Different State Than You Live In

By Brian Richards
Tax, Rental Property, a Different State Than, You

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If you own real estate property in a state other than the one in which you live and you have earned money off the rental of that property, you are required to file a nonresident income tax return in that state. This is true even if you live in a state that does not have an income tax. If the property resides in a state that does not have income tax, you are required to report the income and pay taxes in your home state. Most online tax preparers and tax software have the ability to file nonresident income tax with multiple states. If you own an out-of-state rental property, look for software that can do this for you.

Complete your federal tax return (form 1040, 1040A or 1040EZ), listing all income from your rental property. You should also list any deductions associated with the property, as the income is considered business income and standard business deductions apply.

Complete a nonresident state tax return for the state in which your rental property resides. List only the income and deductions from that rental property. For instance, if you have a full-time job in your home state or rental properties in other states, the income from those sources should be omitted.

Prepare a state tax return for your home state. Even though you already listed the income associated with the out-of-state rental property on the nonresident tax return, you must also report this income on your home state's tax return.

Take a credit on your home state's tax return for all state income tax paid to other states. For instance, if you owed another state $500 in taxes for the income earned on a rental property there, you can take a credit of $500 on the taxes owed to your home state. This will reduce your state tax liability equal to the amount you paid to the other state.

About the Author

Brian Richards is an attorney whose work has appeared in law and philosophy journals and online in legal blogs and article repositories. He has been a writer since 2008. He holds a Bachelor of Science in psychology from University of California, San Diego and a Juris Doctor from Lewis and Clark School of Law.