Does out of state owner need to file a tax return in Ohio?

Question

Hello, looking for some advice.

I live in California and last year purchased a single family rental property in Englewood (Dayton), Ohio. I went to do my taxes for 2020 and my preparer told me I also have to file a return in Ohio on which I neither owe or get anything as it comes in at a loss due to depreciation. A friend's tax preparer said that's wrong I don't file in Ohio, and another friend of who also lives in California has owned a similar rental property in Ohio for a couple of years said he's only ever filed in California, not Ohio.

I also just received a letter from the City of Englewood telling me that the rental of property for income within the city limits qualifies for local income tax at 1.75%.

Can anyone provide any insight in this? Want to make sure I'm doing the right thing.

Thanks.

Jack Smith · Answer

Might want to check with a CPA for second and third opinions that knows your specific situation. Typically, you file where the revenue is generated, regardless of whether or not you made any money (and now you'll probably make a little less!). I've got to believe Englewood is going to want their tax share, too. All the cities I invest in get their piece, even though I don't live in any of them.

Account Closed · Answer

Perhaps ask a preparer from Ohio.

Ruth B. · Answer

@Remington Lyman in Dayton!

Ruth B. · Answer

@Keith Gilbey I live in Colorado and own property in Ohio, and my accountant filed an Ohio return for me this year and also included this info on my federal return. There were quite a few Ohio-specific forms, including an IT BUS and an Ohio Non-Resident Credit Calculation. I'm not an accountant and this stuff makes my head hurt. Sharing my experience and recommending that you consult with a professional. ;)

Aaron Zimmerman · Answer

It is ultimately your choice. The reason to do this is the ability to roll-forward losses for when you sell. For instance, if you have $15k of losses built up and then sell 5 years down the line and have a $25k gain, you'll be able to offset the income partially with the losses. It depends on how big the losses are as well. Whatever you do one year, I'd recommend continuing to do it for future years. We see this with clients all the time and it's a very common situation.

I would also recommend talking to an experienced CPA who knows the local taxes as well, in your instance. The above was meant for more general state advice.

Jack Smith · Answer

I was hosting our monthly call last week of real estate investors from other states working in Ohio. We had a CPA on the call from Akron and I specifically asked him this question. He emphatically agreed with the need to file in Ohio – even specifying the Ohio form number needed.

I suggest getting some better advice.

Keith Gilbey · Answer

@Aaron Zimmerman That's great info and advice, thank you so much.

Basit Siddiqi · Answer

@Keith GilbeyNot only will you be required to file an OH tax return, you may be required to file City locality returns depending on which city the property is located in.

Remington Lyman · Answer

Nice! I want to expand there soon

Remington Lyman · Answer

Where do you invest in Ohio?

Does out of state owner need to file a tax return in Ohio?

Does out of state owner need to file a tax return in Ohio?

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