Taxes on Rental Income

[Steve Maye]

I am moving out of state. The state I will move to has a 6.5% income tax. I will have a rental unit in my home state of Tennessee. Can I assume the rental income I receive will be taxable in my new state of residence?

Do I just pay the taxes and move along? or is there a smarter way?

[Bill Walston]

Originally posted by Steve Maye:

I am moving out of state. The state I will move to has a 6.5% income tax. I will have a rental unit in my home state of Tennessee. Can I assume the rental income I receive will be taxable in my new state of residence?

Do I just pay the taxes and move along? or is there a smarter way?

Steve -

MOST, but not all, states require residents to report all earnings, regardless of source - you will need to check your state for reporting requirements. A credit is then given for any taxes paid to another state for out of state income. Since we don't have a personal income tax here in TN, you wouldn't be receiving a credit, and most likely will pay a tax in your new state of residence on the full amount of your real estate profits.

For the first year in your new state, you will report only the amount of rental income earned while residing in the new state. So if you moved to your new state in July, you would only report six months of rental income in the new state.

You will definitely want to find a good tax pro who works with real estate investors to give you advice on this :)