new to this forum and was hoping someone out their could shed some light on taxing of passive income in the U.S. ? does it differ from state to state?
All income differs by state. For example if a particular state has a state income tax than will be imposed on an earner versus a state that has not state income tax. Some cities also have an income tax which will be a factor. Most states as well as cities tend to use the taxable income line from the federal form to determine how much you pay. That being said if you owe no federal tax usually you won’t owe state or city tax either.
In passive real estate in Houston Texas you typically will make $200/month off a single family house. That is $2,400/year. Your typical house will be acquired for $100,000. That will be depreciated over 37.5 years. That gives you a depreciation loss of $2,600 per year. That means that in this simplified example the depreciation covers virtually all the income that you earn in the real estate on your federal return. Since Texas doesn’t have a state income tax, you are done. But in Virginia which does have an income tax using the same example the state form asks you to enter the amount from the federal form that in this example shows zero and asks for a percentage from that number.