When reporting rental income to a non-resident state do I enter the gross amount of income or the Federal adjusted amount?

Forum|Forum|4 years ago
February 18, 2022
3 replies
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I earned approximately 17K in rent on a property in South Carolina. I reside in Michigan. On my Federal return given expenses, my income is about 1K. Which number do I report on my SC state return?

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TomD8

Employee

You enter your net income (or loss). Since TurboTax draws its state tax return information from your federal return, the program itself should generate the correct info.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

Carl11_2

Employee

The program "should" fill those details in for you. But basically, you report the total gross rental income, and the taxability of that will be offset by the rental expenses and depreciation taken.

chrgrl

I would love to know if you ever figured this out because I'm in the same situation.

My husband and I had rental income of about 40K, but our net income is zero after all the expenses associated with our rental property (I guess we make too much from our "regular jobs" to take an actual loss).

I'm stuck on the income section of the South Carolina tax return. The federal info is printed there, but the boxes for SC have to be filled in manually, and it asks for rentals/royalties earned in SC and certainly does not differentiate between gross or net.

If it is gross, I do not see anywhere later in the SC return to enter expenses unless I'm missing something.

Carl11_2

Employee

Nothing abnormal there. In fact, it is not common for long term residential rental real estate to actually show a profit or gain on line 26 of the SCH E. Especially if there's a mortgage on the property. If you add up the deductible rental expenses of property taxes, insurance, mortgage interest and add that to the depreciation you're required to take, that will commonly exceed your total rental income for the year. Add to that other allowed rental expenses such as maintenance and repair expenses, and you're practically guarantted to show a loss.

Up to a maximum of $25K of excess loss can be claimed against other ordinary income, unless your AGI exceeds something like $160K for the year I think. But unallowed losses are just carried forward to the next year.

It's also not uncommon for the carry over losses to build up and increase with each passing year. But no matter what, those losses can be realized in the tax year you sell the property.

It's gross rental income.

If it is gross, I do not see anywhere later in the SC return to enter expenses unless I'm missing something.

I'm not familiar enough with state taxes other than to tell you, but I know for a fact you enter the gross rental income.I would fully expect expenses to be dealt with on a later screen unless the program already imported them from the federal side. If it did import them, I'd expect you to be able to see that on a later screen such as a summary screen once you complete the rental section of the state return.