File nonresident taxes in PA for $0 profit across two rental properties?
April 17, 2016 1:23 AM   Subscribe

Do I need to file taxes in as a nonresident in Pennsylvania? I have two small rental properties there, and they are exactly and weirdly balanced this year: +$XX and -$XX, net $0. File?

PA's tax site contains this direction regarding who must file: file if "You incurred a loss from any transaction as an individual, sole proprietor, partner in a partnership or PA S corporation shareholder."

Does my case include a "loss on a transaction"? The net-negative property needed a lot of work after the last tenant left (many years of smoking...). Perhaps it hinges on what PA considers a "transaction", and I have no idea what that means to them in my case.
posted by NortonDC to Work & Money (7 answers total)
I'm neither an accountant nor a tax attorney, but I before clicking "more inside", I was thinking "duh, file". Pennsylvania is really not going to care if you send them a return when you didn't need to, but my suspicion is that you need to. You seem to be going to great lengths to come up with a justification for not filing.

This page seems to make it clear you're expected to file--you had income from a PA source, which is the case independent of any losses that those properties subsequently incurred.
posted by hoyland at 5:30 AM on April 17, 2016 [2 favorites]

what definition of "income" is that?
posted by andrewcooke at 9:05 AM on April 17, 2016

Income is money that comes in. Money that goes out is expenditure. The fact that the two cancel each other out doesn't mean that there's no income.
posted by pipeski at 9:24 AM on April 17, 2016 [2 favorites]

the form you linked to repeatedly says "net income". that's the difference between gain and loss. your definition is gross income. they don't have a net income - it is zero.
posted by andrewcooke at 12:02 PM on April 17, 2016

From this page you must report gross income that exceeds $33.

It is true that only net income is taxed, but you must report that by showing your math-- starting from gross income and then subtracting deductions.
posted by JackFlash at 2:50 PM on April 17, 2016 [1 favorite]

So I'm neither American, nor an accountant, and have never had to tangle with the IRS, but from what I know about holding U.S. rental properties, you need to report depreciation every year, and I would assume that place would be on the tax form. + all the much better-informed answers above.
posted by morspin at 9:05 PM on April 17, 2016

Response by poster: So here's what happened: the properties were NOT in balance, they were significantly net negative, but unless real estate is your primary job the loss cannot offset other income, so the system was (somewhat mysteriously) showing it as $0. That led me to decide that I'd had a loss in PA, and had to file. $0 PA income, no refund.

For next year, carry forward the loss on federal against 2016's rental income. PA, superhelpfully, both disallows net negative rental income by non-professionals AND prohibits carrying losses forward across years.
posted by NortonDC at 3:34 PM on April 18, 2016

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