Post by librarymom on Jan 17, 2021 20:25:02 GMT -5
I have a tax situation this year - I know I probably need to see someone but I have always done my taxes myself with no problems so I figured I would just ask on here since people know things. This year, however, I inherited a piece of rental property in another state (joint with my sister) in May when our mom died. I live and work in MD and the property is in Virginia. The property does not generate a huge income (about $450 each) per month but it would still be classified as income in VA right? Also, I know my mom was using depreciation on the property on her taxes. Would this be claimed on my MD taxes? or VA if I need to file it there? If in VA, could depreciation be more that I owe? Also can I deduct the property taxes?
The property was worth about $220K when we inherited it. If I need to file in VA, do I need to file it with my sister? My sister is a bit of a mess financially and I do all of the management of the property and we just split the amount left after I withhold (in a joint account) taxes, condo fees and enough to maintain a 4K maintenance buffer (it is a condo so not a ton of expensive maintenance but high fees). I have a feeling she would never even consider filing VA taxes.
->> I am not a lawyer, CPA, or any knowledgeable person. <<-
This is not what you asked (ha, sorry). But when I inherited property jointly with my siblings, we ultimately created a trust to hold the property. You may want to consider this. Our attorney explained to me that if we created a trust, we were protecting ourselves b/c in the event of a lawsuit, the trust could be sued for all of its assets (which means the property), but that our own personal assets would be protected. I mean I'm not *planning* on a lawsuit, but we did this anyway. The fact that you are fully in charge and your sibling isn't super together financially makes this more desirable, IMO.
In our case, because the Trust has literally no liquid assets, every year we make a loan to the trust so it can pay its property taxes. In return, if we ever sold the property (I wish), the first proceeds off the top will be used to pay us back for our loans. This means that we wouldn't owe taxes on that, because it wouldn't be a gain, it would just be a loan repayment. That also means that I cannot deduct the property taxes b/c I am not paying them technically; the trust is paying them. With money I have lent it.
Onto your question, I am no expert. I believe you will need to file a nonresident return in VA.
Post by librarymom on Jan 17, 2021 21:10:27 GMT -5
That is good advice and actually something we do need to do. My husband and I are, in fact, both attorneys, but I don't practice anymore and he is in personal injury so we talked about it but never did anything. I thought at first my sister might want to sell the property as she is in a totally different financial situation than we are and I thought she would want the cash but she did not want to and prefers the steady passive income. We are very close and talked about what we wanted to do. We (my husband and I) would like to keep the property long term and if she ever wants us to we would buy her out. It is in a desirable location and it is a good property.
My sister and I inherited farm land (we rent it) in another state and created an LLC, taxed as an S corp. This will be our first year with it outside of our mother's estate. We will have to file a tax return in the state where we own the property.