Out of state losses and filing taxes

[Levi Perl]

I live in Kansas. My single-member LLC is registered in KS. The LLC owns property in MO. The MO property had a net loss for 2024. I understand I file for the net loss. But do I do so in KS, MO or both states?

[Ashish Acharya]

@Levi Perl Since your single-member LLC (SMLLC) is a disregarded entity, all rental income or losses are reported directly on your personal tax return rather than at the LLC level. Here's how to handle the tax filings for your rental loss:

• Missouri (MO): File a MO non-resident tax return (MO-1040NR) to report the rental loss. While you likely won’t owe taxes due to the loss, filing is still required since the rental property is located in Missouri.
• Kansas (KS): As a Kansas resident, report the rental loss on your KS state return (KS-40) since Kansas taxes your worldwide income, including out-of-state rental activity.
• Tax Impact: The rental loss reduces your federal taxable income and may lower your overall state tax liability. However, passive loss limitations apply—if your AGI exceeds $150K, you may not be able to deduct the full loss in the current year but can carry it forward to offset future passive income.
• Future Considerations: If the property generates taxable income in later years, Kansas allows a credit for taxes paid to Missouri, but since you’re reporting a loss, this doesn’t apply. You will need to continue filing a MO tax return even in loss years.

Given the complexity of passive losses and state tax credits, consulting a CPA can help optimize deductions and ensure long-term tax efficiency.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.