I live in California and am considering purchasing a house in Tennessee to use as a rental. Tennessee does not have a personal income tax on anything but interest and dividends from stocks and bonds.
Will I have to delcare the rental income on my California tax return and pay taxes here, just as though the rental property were in California?
Thanks for your assistance!
I’m in Calif.
I think the answer to your question is you pay tax in California if your RE activities are “passive” (i.e. file SchE for Fed) and if “active” (file SchC) then you would be bound by TN law since effectively you would be operating a business in TN.
The IRS has specific definitions for “active” and “passive”, but in general most investors are filing SchE and are considered “passive” for tax purposes.