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Last October I moved from California to Connecticut, converting my primary residence to a rental. I didn't get it rented out until December, so I ended up with a loss for the year. My California income taxes ask for the portion of the loss for properties located in California, so obviously I attribute the full loss to my California taxes. Then my Connecticut income taxes ask me for the portion of the loss I attribute to when I was a resident of Connecticut, which is also all of it. So it seems that I can attribute the full loss to both states, although that doesn't seem right.

My understanding is that normally if you have a net rental gain, and you would pay taxes to both states but then get a credit such that it would balance out. Let's say I made a net of $10,000 on my rental property. California taxes me $1000. Connecticut wants to tax me $500. From what I've heard, I could get a credit from Connecticut for the taxes I paid to California which would negate the $500 and thus the double taxation. But in this case, since I have a loss, I would be getting a negative credit, thus increasing my taxes. But there's nothing forcing me to take that "credit", is there? So can I deduct the full rental loss on both states' income taxes?

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Both States tax you on the income, so why doesn't it seem right for both of them to also allow you recognizing losses?

Nothing wrong here.

You get the credit for the actual tax paid in the other state, which will first be offset by the loss recognized by that State. So consider you have $500 rental loss, and you apply it to your CA income. CA will tax you on $500 less, so the tax will be less. You then credit that tax on your CT tax return which also recognized the $500 loss. CT tax will be less, CT credit for CA will also be less - it all balances out.

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