Deductibility of property taxes paid to non-resident state


B

bob.isman

My wife and I reside year-round in CA. We own a house that she
inherited from her father in NH and pays property tax on it (it is not
a rental property). Can the property tax we pay on the NH house be
deducted on the federal and/or CA returns? Would there be any point
in completing a NH tax return to claim it there, given that we have no
income from NH?
 
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B

Bill

(e-mail address removed) posted:
My wife and I reside year-round in CA. We
own a house that she inherited from her father
in NH and pays property tax on it (it is not a
rental property). Can the property tax we pay
on the NH house be deducted on the federal
and/or CA returns? Would there be any point
in completing a NH tax return to claim it there,
given that we have no income from NH?
On the facts presented, the house in NH can reasonably be considered as
a second home (as is a vacation or seaside home) and the taxes paid can
be claimed on Schedule A.

If you ever do rent the property, however, previous years deductions of
tax would possibly/probably be questioned.

On your second point, since you have no income from NH, it would be
pointless to file a tax return. (Besides, isn't NH one of those states
with no personal income tax? I believe they tax only interest and
dividends of residents.)

Bill
 
B

brew.one

If you ever do rent the property, however, previous years deductions of
tax would possibly/probably be questioned.
you can convert a personal residence to rental property. What you
can't do
is convert personal property to investment property. Perhaps what you
are
alluding to is making the election to capitalize expenses as part of
your "proof"
that it was investment property.
 
M

Mark Bole

My wife and I reside year-round in CA. We own a house that she
inherited from her father in NH and pays property tax on it (it is not
a rental property). Can the property tax we pay on the NH house be
deducted on the federal and/or CA returns? Would there be any point
in completing a NH tax return to claim it there, given that we have no
income from NH?

See the instructions for Line 6 of Form 1040 Schedule A. You can deduct
there all state, local, and foreign taxes paid which are based on the
value of any real property you own that isn't used for business.
Doesn't matter if it's your first, second, or one hundredth property,
occupied or vacant (but a rental would be considered "used for business"
and such taxes would be deducted against the rental activity, not on
Schedule A).

-Mark Bole
 
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R

Ron Rosenfeld

My wife and I reside year-round in CA. We own a house that she
inherited from her father in NH and pays property tax on it (it is not
a rental property). Can the property tax we pay on the NH house be
deducted on the federal and/or CA returns?

Yes on Federal. We have homes in two states and deduct both. I have no
knowledge regarding CA rules.
Would there be any point
in completing a NH tax return to claim it there, given that we have no
income from NH?
NH has no taxes for which this would be applicable to you (i.e. no income
tax).

However, if you should happen to convert it to a rental property, AND ALSO
realize $50,000 or more in gross rentals from this property, then (under
current rules) you would have to file a NH Business Profits tax. In that
case, the property taxes paid would be deductible on your NH BPT return.

If it is a rental property, and your gross rents are less than $50,000,
then you have no worries.
--ron
 
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