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Tax, SDIRAs & Cost Segregation

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Michael Meates
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Taxes for investing out of state

Michael Meates
Posted Jun 3 2023, 09:48

Hello everyone!!

We live in NYC and interested in investing in the Cleveland market but wanted to ask advice on tax implications?? 
Do we pay an out of state tax on top of standard state taxes due to living in for example NYC? 

Apologize if this has been answered prior and appreciate the help!


Katie & Michael 

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Patricia Steiner
  • Real Estate Broker
  • Hyde Park Tampa, FL
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Patricia Steiner
  • Real Estate Broker
  • Hyde Park Tampa, FL
Replied Jun 3 2023, 10:03

Gotta google - there's a lot on this out there.  Here's one:

https://www.stessa.com/blog/ow...

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Joseph Palmiero
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Joseph Palmiero
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Replied Jun 3 2023, 10:09

You will need file a Ohio tax return to report and pay tax on that rental income.  Then you will receive a credit for that tax on your New York income tax return.

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Michael Meates
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Michael Meates
Replied Jun 3 2023, 10:20
Quote from @Joseph Palmiero:

You will need file an Ohio tax return to report and pay tax on that rental income.  Then you will receive a credit for that tax on your New York income tax return.

Appreciate your help!!!
Account Closed
  • Columbus, OH
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Account Closed
  • Columbus, OH
Replied Jun 5 2023, 07:54

Income taxes are based on where the income is generated- properties in Cleveland will pay Ohio taxes, NYC will pay NY taxes, etc.

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Chris McCormack
  • Accountant
  • Edina, MN
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Chris McCormack
  • Accountant
  • Edina, MN
Replied Jun 5 2023, 13:26

Owning real estate usually translates to losses on your tax return. You are liable for taxes on income generated in  another state but if you generate a loss, you could avoid them completely. 

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Don Petrasek
  • Real Estate Agent
  • Westlake, OH
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Don Petrasek
  • Real Estate Agent
  • Westlake, OH
Replied Jun 6 2023, 06:14

Highly likely that you will also have to pay local taxes here in addition to any state tax obligations....its best to consult a tax professional on this as it can get complicated. Also consider the extra cost of having your returns done for another state/city in your ROI estimate.

  • Real Estate Agent Ohio (#2018004375)

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Chris Picciurro
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Chris Picciurro
Tax & Financial Services
  • Accountant
  • Franklin, TN
Replied Jun 6 2023, 08:25

Good morning Michael - as a resident of NY, you will pay tax on all your income. You will also file a state and local (if applicable) return in Ohio (not fun due to school district tax returns). If you owe state tax in Ohio, you will receive a tax credit on your NY return. Essentially, you are not double taxed. At the end of the day you pay tax on all income based on the NY state tax rate.     

NY tax guidance

That said, if you have rental properties taxable income should be very low due to depreciation. Just make sure you CPA understands that  states handle bonus depreciation differently. Not all states honor the federal tax deduction rules.

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Curt Riffel
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  • Dallas, TX
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Curt Riffel
  • Accountant
  • Dallas, TX
Replied Jun 6 2023, 13:35

City of Cleveland -Central Collection Agency - do not forget local taxes also. 

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Bob Stevens
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Bob Stevens
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Replied Jun 6 2023, 17:49
Quote from @Michael Meates:

Hello everyone!!

We live in NYC and interested in investing in the Cleveland market but wanted to ask advice on tax implications?? 
Do we pay an out of state tax on top of standard state taxes due to living in for example NYC? 

Apologize if this has been answered prior and appreciate the help!


Katie & Michael 


 call your accountant, DO NOT take tax advice online, 

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Basit Siddiqi
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Basit Siddiqi
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  • Accountant
  • New York, NY
Replied Jun 7 2023, 04:31

Ohio is a unique state that they have a lot of locality returns.

Therefore, if you invest in Cleveland, you will also have to file a locality return with Cleveland.

Best of luck