Question

Rental income from a LLC and Cash distribution from the LLC. Do I need to file New Hampshire state tax?

Forum|Forum|2 years ago
April 2, 2024
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My spouse and I have rental property in an LLC and we are the only members of LLC. The rental property is in New Hampshire and generated gross income of $22,250. Schedule K-1 was received from the LLC, and for the 2023 tax year turbo tax triggered a state tax filing because our Dividends and Interest Income are more than $4800 for married filling jointly. $35 bank interest was generated by the LLC and others were generated through the personnel brokerage account and savings account. My understanding is that I will have to pay state tax for all types of dividends and interest income. While going through the state filling questions, distributions from LLC question got me confused. LLC generated profit, so I distributed cash to my spouse and I which is reported in K-1. Should I select Yes to this question?

I have had this LLC for 4 years and turbo tax never triggered a state tax filling for cash distributions.

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J

jtax

This has been a confusing area of NH tax law for 10 or 20 yrs. I look forward to the I&D tax going away in 2027.

NH seems to tax actual distributions from LLCs/partnerships/s-corps (cash or property). It is unrelated to any number on a K-1. It is not a profits tax (the is a separate NH tax that only applies if gross income > $103k). Below are the details from the NH DP-10 instructions, but I find this confusing and would welcome thoughts of anyone who has carefully read the statues or regulations.

https://www.gencourt.state.nh.us/rsa/html/NHTOC/NHTOC-V-77.htm

https://www.gencourt.state.nh.us/rules/state_agencies/rev900.html

The DP-10 instructions ( https://www.revenue.nh.gov/forms/2023/documents/dp-10-instructions-2022.pdf ) page 3 says (emphasis added):

LINE 2 DISTRIBUTIONS SUBJECT TO THE NEW HAMPSHIRE INTEREST AND DIVIDENDS TAX

In Column I, enter the entity code number that represents the entity type of the payor. See the box below for ENTITY TYPE CODES. In Column II, enter the name of the
payor. In Column III, enter payor's SSN or FEIN, if known. In Column IV, enter the total amount of cash or property distribution received or constructively received. This
amount may not correspond to any line on your Federal Form 1040 or Federal Schedule K-1. NOTE: This is not a tax on pass-through portfolio income, gains or losses from a Federal Schedule K-1. Therefore, do not include any pass-through income, gains or losses from Federal Schedule K-1. Enter any taxable annuities or the actual cash or property distributions you received or constructively received from any of the taxable income classes described in RSA 77:4. These distributions are subject to tax in New Hampshire as a "dividend". Taxable annuities are those annuities not invested in a tax-deferred investment plan pursuant to RSA 77:4-b.

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N

narendran-kandasAuthor

@jtax I am well under the Business Profit Tax (BPT), so I don't have to pay state BPT taxes.

Reading through the DP-10 instructions (page 3), It look like I will have report the dividend/interest cash distribution (which is taxable income class described in RSA 77:4) from the LLC and not to include rest of the cash distribution.