LA non-resident taxes on federally exempt income

[brookefox]

What is the name of your state (only U.S. law)? My state: WA. Tax state: LA

With regard to out of state non-residents, see the LA instructions quoted below for handling federally tax exempt income. I find them to be unclear: on the one hand saying they must be earned while domiciled in state and then saying simply that they should be included if they are reported on lines 8b or 9b of the 1040.

We were not ever domiciled in LA in 2007 but we have amounts on line 8b and 9b. Logically, it would seem the initial requirement should govern as for those of us residing out of state they are not LA incomes and otherwise the federally tax exempt amounts might be taxable by as many states as one had income in (that is, if all states had that stipulation).

Additions
Line 13 – Interest income and dividends not reported on your federal

return are taxable to Louisiana, if ALL of the following conditions are met:

a) the interest and dividends were earned while you were domiciled in

Louisiana; b) the interest and dividends were received from obligations of

a state or political subdivision of a state other than Louisiana; and c) the

obligations were purchased on or after January 1, 1980. Obligations of the

State of Louisiana, its political subdivisions, or public corporations created

by them and their constituted authorities are exempt from Louisiana taxes.

If you have nontaxable interest or dividend income on Federal Form

1040A, Lines 8b or 9b, or Federal Form 1040, Lines 8b or 9b, add the

amounts together and print the result in the box on Line 13 under the

Louisiana column. AND they were earned while you were domiciled in

Louisiana???What is the name of your state (only U.S. law)?

[brookefox]

A contributor posted:

The instructions are not confusing if you read them. The instructions are only useful to such income which was NOT reported on your 1040. Since they WERE reported, you will fill in the box appropriately. The AND is relevant only if they were not reported on the 1040.

Report them...

Having read the instructions and reading them again I inquire further. Why are the rules different for those items which one must report on the 1040 (i.e., from federally tax exempt securities) relative to other federally exempt items which are not required to be reported at all (whatever they may be, but apparently not from federally tax exempt securities)? The former must be reported as taxable to LA (and likely other states) while the latter must only be reported if ALL stated conditions are met. However, among those stated conditions is one that would require that the amounts be reported on line 8b anyway: the interest and dividends were received from obligations of a state or political subdivision of a state.

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With regard to out of state non-residents, see the LA instructions quoted below for handling federally tax exempt income. I find them to be unclear: on the one hand saying they must be earned while domiciled in state and then saying simply that they should be included if they are reported on lines 8b or 9b of the 1040.

We were not ever domiciled in LA in 2007 but we have amounts on line 8b and 9b. Logically, it would seem the initial requirement should govern as for those of us residing out of state they are not LA incomes and otherwise the federally tax exempt amounts might be taxable by as many states as one had income in (that is, if all states had that stipulation).

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Additions
Line 13 – Interest income and dividends not reported on your federal

return are taxable to Louisiana, if ALL of the following conditions are met:

a) the interest and dividends were earned while you were domiciled in

Louisiana; b) the interest and dividends were received from obligations of

a state or political subdivision of a state other than Louisiana; and c) the

obligations were purchased on or after January 1, 1980. Obligations of the

State of Louisiana, its political subdivisions, or public corporations created

by them and their constituted authorities are exempt from Louisiana taxes.

If you have nontaxable interest or dividend income on Federal Form

1040A, Lines 8b or 9b, or Federal Form 1040, Lines 8b or 9b, add the

amounts together and print the result in the box on Line 13 under the

Louisiana column. (AND they were earned while you were domiciled in

Louisiana???)

[LdiJ]

The bottom line is that federal tax law and state tax law are different. LA chooses to do thing the way that they choose to do them.

[Dandy Don]

Call the LA tax authorities to get your questions answered.

[brookefox]

I had tried that but found no numbers available.

[mtpockets]

Additions
Line 13 – Interest income and dividends not reported on your federal

return are taxable to Louisiana, if ALL of the following conditions are met:

a) the interest and dividends were earned while you were domiciled in

Louisiana;

Since you were not domiciled in LA, this line does not apply to you.

[brookefox]

Thank you, mt, and that's what I would like to think, but you see the contradiction in the directions? That and the fact that TurboTax wants to dump the whole amounts of tax-exempt earnings into those taxable by LA, eventhough it knows I live full time out of state are what make me unsure.

[LdiJ]

Originally Posted by brookefox

Thank you, mt, and that's what I would like to think, but you see the contradiction in the directions? That and the fact that TurboTax wants to dump the whole amounts of tax-exempt earnings into those taxable by LA, eventhough it knows I live full time out of state are what make me unsure.

What prompted Turbo Tax to bring LA into things at all?

[brookefox]

For the TT state tax return.

[LdiJ]

Originally Posted by brookefox

For the TT state tax return.

Maybe I am confused, but you seemed to indicate that you neither lived nor worked in LA. That is why I am asking why Turbo Tax was prompted to do an LA return.

[brookefox]

Neither live in nor work there but have investment income from there (partnership interests).

[NotClueless]

Then it is similar in concept like New York - it wants its tax $$ from income generated in that state, regardless of residency.

You'll have to override it in TurboTax. If you neither work in LA, nor are domiciled in LA, then your tax-exempt income (assuming it is NOT LA income) would be exempt. Any LA bonds in that mess?

[davew128]

Originally Posted by NotClueless

Then it is similar in concept like New York - it wants its tax $$ from income generated in that state, regardless of residency.

You'll have to override it in TurboTax. If you neither work in LA, nor are domiciled in LA, then your tax-exempt income (assuming it is NOT LA income) would be exempt. Any LA bonds in that mess?

Let's get a couple things straight here.

Every state with an income tax will tax non-residents on business income derived from that state. That concept is not unique to Lousiana or New York.

Partnership income in and of itself doesn't make you taxable in a state: the income has to be BUSINESS income. If a partnership is based in a state and is only an investment partnership, a non-resident is NOT taxed on that income in that state as it would be non-business income.

If you ARE taxed in that state, then most states will require that you include tax exempt interest from other states as part of your total overall income in its calculation of your tax in that state.

[Ginny J]

Line 13 – Interest income and dividends not reported on your federal

return are taxable to Louisiana, if ALL of the following conditions are met:
a) the interest and dividends were earned while you were domiciled in

Louisiana; b) the interest and dividends were received from obligations of

a state or political subdivision of a state other than Louisiana; and c) the

obligations were purchased on or after January 1, 1980.

Dave, the key is that they are NOT domiciled in Louisiana. ALL THREE CONDITIONS MUST BE MET to be taxed by Louisiana. We are NOT saying that whatever state they are in might not tax it - but LA can't tax it cuz they aren't residents.

These types of returns are the kinds that I recommend that a tax professional handle, at least the first time. I'm am NOT talking a "I'm only open during tax season" type of place, but one that is open year-round. You will look for one that can handle multi-state partnership types of tax returns.

[LdiJ]

Originally Posted by Ginny J

Dave, the key is that they are NOT domiciled in Louisiana. ALL THREE CONDITIONS MUST BE MET to be taxed by Louisiana. We are NOT saying that whatever state they are in might not tax it - but LA can't tax it cuz they aren't residents.

These types of returns are the kinds that I recommend that a tax professional handle, at least the first time. I'm am NOT talking a "I'm only open during tax season" type of place, but one that is open year-round. You will look for one that can handle multi-state partnership types of tax returns.

I agree. Turbotax is automatically generating an LA return when it should not, and its almost impossible to override something on Turbotax. Most likely the OP answered a question wrong in the Turbotax interview, which is VERY easy to do.