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Out of State Tax Credit

October 13, 2016 • Scott Harada • Log In to Post Comments

A CA resident individual taxpayer owns rental real property in multiple states which generate positive taxable income and an income tax liability for each of these states.  However, for CA reporting purposes, all the out of state income is sheltered by CA losses and expenses and accordingly is not taxed in CA.  

Our tax preparation software allows these out of state tax credit reduce the CA tax liability eventhough the income has not been tax in CA

Is this correct?


I assume they have an overall positive AGI. You prorate the out of state income to the total AGI for each property individually to determine the CA tax and match that to the tax paid to the other state. So, yes they could be entitled to a credit.


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