Do I have to pay taxes on CA rental income if I move to TX?

5 Replies

Hello all

If an investor has a few rental properties in California and decides he wants to move to a tax free state like TX how would the income generated from the California homes be taxed? And would you be able to write off losses from CA home if not living in the state? Thank you for your help.

@Miguel Ochoa - great question! An investor has to pay taxes where the income is generated as well as their state of residency. There are state tax credits and offsets that help to alleviate double taxation, but the general gist is that at the state level you'll pay taxes at the rate of the highest tax state whether that's where the income is generated or where you are domiciled. This is a great conversation to have with your CPA to help you plan where to move and where to invest and what your true ROI is! Best of luck!

I am not sure it's actually 10% if you live out of state. Here are the marginal rates I found online for California.

For single and married/registered domestic partners filing separately:

  • 1 percent on the first $8,544 of taxable income
  • 2 percent on taxable income between $8,545 and $20,255
  • 4 percent on taxable income between $20,256 and $31,969
  • 6 percent on taxable income between $31,970 and $44,377
  • 8 percent on taxable income between $44,378 and $56,085
  • 9.3 percent on taxable income between $56,086 and $286,492
  • 10.3 percent on taxable income between $286,493 and $343,788
  • 11.3 percent on taxable income between $343,789 and $572,980
  • 12.3 percent on taxable income of $572,981 and above
Originally posted by @Miguel Ochoa :

@Jake Hottenrott thank you for the reply. It’s something I have been thinking over it’s about an additional 10% I will definitely have to re-evaluate the numbers. Thanks

One thing you may want to think about when reevaluating is depreciation. Usually, depreciation will wipe out most of the rental income at the end of the year. You may need to file a CA tax return but may not have any income to pay taxes on.

Everyone's situation is different so depending on your situation you could have income to pay taxes on.

 

@Miguel Ochoa

If you decide to move to Nevada. 

You will be required to file a federal tax return in addition to a California non-resident tax return.

If the California shows a net rental income, you may have to pay a tax to California.
If you have a loss, you may be eligible for a Net Operating Loss(NOL) if the state allows for it.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here