Out of state investing Tax Considerations- Illinois

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Out of state investing Tax Considerations- Illinois

John Blanton
Investor · Apex, NC · Member since 2017 · 135 posts · 97 votes

I am looking at investing in either a turnkey rental or promissory note as an out of state investor (NC) in Illinois. The LLC/Corp is based in Illinois that I will be investing with/in.

I want to make sure I fully understand the tax consequences before making this investment. Will I have to pay state income tax in both Illinois and North Carolina? Or just in NC as that is where I reside?

Will I have to file both an NC and Illinois state income tax return?

Appreciate the help!

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  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    6y

    You will have to file a return in IL and pay income tax in IL on income apportioned in IL. If your LLC is a single-member, then no entity level return is required. If your LLC is taxed as a partnership, you will need to file an entity level tax return. I would recommend speaking to your CPA as depending on the type of investment, a different structure may be well suited.

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  • John Blanton
    OP
    Investor · Apex, NC · Member since 2017 · 135 posts · 97 votes
    6y

    Thanks @Lance Lvovsky appreciate the insight!

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    6y

    @John Blanton

    If you create an LLC with more than one member, a partnership return is required.
    If you create a Corporation, a corporate return will be required

    If you have a property in Illinois, an Illinois tax return may be required. Ultimately, you may not have an additional tax if you have expenses more than income.

    If you have income, you pay roughly the state with the higher tax rate.

    If you have a promissory note, unless it gets to the level of a trade or business, you may not have an additional state filing.

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