AZ Non-Resident Depreciation Add Back

[BulldogTom]

Taxpayer has a rental property in AZ.  All other income is from CA, their resident state.   The rental has a 2021 loss of 3K.  Depreciation makes up 1K of the loss.   In ATX, the AZ 140NR is adding back 1K of depreciation and taxing it to AZ.

Depreciation is not allowed in AZ?

Even if the depreciation is removed from the calculation, there is still a 2K loss for AZ purposes.  Why the tax on the Depreciation?   

Any help greatly appreciated.

Tom
Longview, TX

 

[joanmcq]

Look at the AZ return. They add back the depreciation, but then there is a line to put in AZ depreciation. That could be the same number if there aren’t any fed/state differences.

That screwed me up a bit the first time I was doing an AZ return.

[BulldogTom]

It looks like a new form I have not seen before, and AZ 140NR-SBI.   But I had to override it to take out the client's CA source Sch C business income.   I don't think that is how it is supposed to work.   

But it did get rid of the depreciation issue.

Thanks

Tom
Longview, TX

[joanmcq]

Hey Tom, the SBI is a small business form, not for rentals. I’m doing my client with AZ rental right now.  The federa depreciation is added back on line 30 of the 140NR, and then AZ depreciation is put onto line 40.  
I had to make an adjustment because ATX was putting all of the depreciation (my client has a CA rental too) on line 30, when it’s only supposed to be depreciation included in AZ income.