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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121482  
Subject: State taxes on income earned in another state Date: 4/4/2011 7:27 PM
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If I have an investment property in a state other than where I reside, how does that work when it comes to paying state taxes? Live in PA, looking to buy in VA. Would income earned in VA be taxed by the state of VA, but not PA, or would there be double taxation?

Last time I did this, our where we lived didn't have a local tax, so I only paid Federal and the tax in the state the rental was in.

TIA,

IP
cross posted to real estate investing
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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112969 of 121482
Subject: Re: State taxes on income earned in another stat Date: 4/4/2011 8:13 PM
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Typically, your home state taxes all of your income and then gives you a credit for taxes paid to the other state. That credit is normally the smaller of the actual taxes paid, or the home state's tax on the double taxed income.

So effectively you pay the higher of the two state's taxes on that out of state income.

However, some state pairs work the other way around. The non-resident state gives you a credit for taxes paid to your home state. These are definitely in the minority, but there are some out there.

A fairly time effective way to figure it out is to get the instructions for non-resident VA returns and see what they have to say. Also take a look at your PA instructions, keeping an eye out for a credit for taxes paid to other states.

--Peter

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 112981 of 121482
Subject: Re: State taxes on income earned in another stat Date: 4/5/2011 6:17 AM
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Thanks Peter!

IP

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