Pay capital gains and depreciation recapture in 2 sta

Beaverton, OR · Member since 2014 · 118 posts · 119 votes

If a person who lives in a state with state income tax invests in property, either directly or via passive syndication, in another state that also has state income tax, must that person pay BOTH state income taxes on:

1) Taxable cash flow

2) Capital Gains upon sale

3) Depreciation recapture

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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Jason Powell
It's important to note that cash flow =/= to taxable "income".
Cash flow does not include non-cash transactions such as depreciation, amortization, and accrual transactions.
Most home states generally avoid double taxation by allowing a tax credit for income taxed by another state.
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
7y
@Jason Powell

You may be entitled to receive a credit on your resident state tax return for taxes paid to another state.
Oregon has a high state tax rate, so you may not get the dollar for dollar credit but you will get some relief.
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Jason Powell
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Beaverton, OR · Member since 2014 · 118 posts · 119 votes
7y
@Eamonn McElroy Thanks. I am aware cash flow is vastly different from the taxable portion of that cash flow. In fact, I wouldn't anticipate any taxable income coming off the investments for at least a few years. What I'm most concerned with is say, selling a property that I own a piece of in California 5 years from now. I don't want to pay BOTH California state cap gains tax and depreciation recapture AND Oregon (my home state) tax. That would really obliterate my return potential.
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