Does anyone know how the state taxes work for VA if you lived there for only part of the year and lived here in Japan for the second half?  We also have rental income in VA Beach.  Would we need to fill out Form 763? 

I dont know VA form 763 but swing by the VITA office and they will let you know. Generally speaking moving out of a state mid year does not let you out of the taxes and VA is not a military friendly state. As far as the RENTAL, I specialize in those as a VITA guy, the first year is crucial for all subsequent years and this is where most make a mistake doing their own taxes. You must Depreciate your home to get the biggest tax benefit. You need home sale price and LAND VALUE of the property the day you bought it. You depreciate the structure not the land. That is entered in the Schedule E paper work. Make sure you also know all the rental deductions, Insurance, taxes, management fees, home owner associations, electricity you paid while it was empty, dates for rental, income from rental, mortgage interest, repairs, cleaning fees, all of those are tax deductible. You still get the 11,400 standard deduction too. On paper it looks like a loss even if you made money if you depreciate properly. I was the guy sitting in front of you at the Japanbases party. Let me know if you need help. I have been doing VITA and CFS for 18 years. The state tax thing is a pain, I hate state taxes, I am Florida so thankfully I dont worry about that stuff....

Thanx Collins......this is the first time doing taxes on a rental property, so it's going to be a lot more painful this time around.   I'm sure I'll have many more questions!  Thanks for the help!

If you need some help try the VITA office in the FFSC across from the Comissary, rm 331, with the rental especially, it is not hard, takes 10 minutes to do the rental stuff. I can set you up an appt with me too if needed, I work out of my office and only do the harder returns, as a VITA guy...