California Resident with Texas Rental

[peggysioux]

If taxpayer lives in California all of 2006 and has rental property in Texas, would he have to pay tax on the rental income from Texas on his California return? (I think the answer is yes, but wanted to confirm.) I know if the rental property was in a state where taxes were collected, taxpayer would have to file a return for that state and file a schedule S in California. Just unsure how it is handled if in TX. Thanks for your input.

[dsi]

Speaking in general terms, the TP would file both CA and TX returns. CA will give credit for any TX taxes paid by the TP.

[S T]

Calif Resident

Yes is the answer, and unfortunately no credit, as Texas has no State Income Tax.

So you will have to show the Texas Income or Loss on Calif.

Sandy
(In Calif)

[jainen]

schedule S in California

>>file a return for that state and file a schedule S in California<<

The credit is not always taken on the resident state return. If the rental were in Arizona, for example, the out of state credit would be on the AZ non-resident return, not the CA return/

[S T]

Other State Tax Credit

Jainen,

This subject is so hard to get straight in my mind and I have to look up the rules every year.

However, Texas has no State Tax, so therefore, if the t/p is a Calif resident the t/p can not use the form S other state tax credit. The Texas source income will be taxable on the Calif form 540 as a resident t/p and no other State Credit.

If Arizona like in your example, I think you have to file a NR Az return, pay the tax to AZ and then you file the Calif form S on the resident form 540, for the credit on the double taxed income to both Ca and AZ. I don't think you do the Form S on the Arizona return, they want their tax in total.

Sandy

[jainen]

I don't know why it is

>>you do the Form S on the Arizona return<<

Sandy, I don't know why it is or what authority to cite. I just know that for California residents working in Arizona or Oregon, the Schedule S credit is taken on the other state.

[veritas]

Oregon has

a reciprocity agreement with California.

[Joe Btfsplk]

California taxation

California used to tax teacher retirement pensions when a teacher moved to Texas. Later that was ruled to be illegal. The same should apply to all Texas Income, but so far, I don't think there is any rule that prevents California to screwing you for the fact that Texas is a no-income-tax state.

[Larmil]

California used to tax teacher retirement pensions when a teacher moved to Texas. Later that was ruled to be illegal. The same should apply to all Texas Income, but so far, I don't think there is any rule that prevents California to screwing you for the fact that Texas is a no-income-tax state.

Actually I think it was made illegal by Congress. CA was not the only state that would tax pensions of people ever when they left the state (IA was one).

States can, and do, consider all income of a resident to be taxable to their state regardless of source.