How is net income calculated?

If someone needs to file taxes in all fifty states, how is state income tax rate calculated on the taxable income?

• A partner of an LLC files for taxes in all fifty states. If his hypothetical taxable income is $1 million, what is his federal income tax and state income tax for the different states?

• Answer:

  There is no simple answer to the question. It depends on a number of factors, including character of the income, how much of the LLC's income is credited to each state, whether the partner is taxed as a resident of the state or as a nonresident, and the nature and types of deductions against that income - not to mention whether or not the resident state allows for a credit for taxes paid to another state on the same income as many do. Almost every state would require the partner to allocate the business's income that was generated by sources in that state, and many also require that deductions and credits be allocated to the state as well - some states, for example, don't provide for accelerated depreciation, which means that if your LLC takes accelerated depreciation you have to make an adjustment for the difference when figuring the portion of taxable income to be allocated to that state.