--- title: State Sourcing of DST Income for Nonresidents (and When Composite Returns Make Sense) description: Learn more about state sourcing of DST income for nonresidents (and when composite returns make sense). image: https://www.realized1031.com/hubfs/iStock-1556982804-modified-7a0bbf79-21dd-44a9-9364-505e43030cf2.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # State Sourcing of DST Income for Nonresidents (and When Composite Returns Make Sense) Posted Dec 13, 2025 ![iS-1556982804](https://www.realized1031.com/hs-fs/hubfs/iStock-1556982804-modified-7a0bbf79-21dd-44a9-9364-505e43030cf2.jpg?width=2121&height=1193&name=iStock-1556982804-modified-7a0bbf79-21dd-44a9-9364-505e43030cf2.jpg) Investing in a Delaware Statutory Trust (DST) gives you access to [income from several underlying properties within the DST.](https://www.delawareinc.com/blog/what-is-a-delaware-statutory-trust/) This structure offers benefits such as enhanced diversification and revenue from institutional-grade assets. Tax-deferral benefits, at the federal level, are also applicable when you finish a 1031 exchange through a DST. As you earn monthly distributions from the profits of the DST operations, you’re also beholden to income tax at both the federal and state levels. The latter presents a problem when DST properties are scattered across multiple states. How do you go about DST income tax in such a scenario? Realized 1031 shares insights below, including strategies you can use, like composite returns. Let’s take a closer look! ### What Is State Sourcing for DST Income? DSTs own assets across multiple states. As these properties earn income, investors who own DST interests “source” their profits from the state where each respective property sits. Every state has its own rules regarding income taxes. For example, Texas doesn’t levy income tax at all. Other areas, like California, [charge up to 13.3%](https://taxfoundation.org/data/all/state/state-income-tax-rates/) for those within the highest brackets. Filing income taxes for each property under the DST becomes challenging due to this variance, particularly for nonresidents of the state. You may face a patchwork of filing obligations, which takes effort, time, and money to handle. Many investors fail to anticipate this complexity, especially if they are too focused on the [federal tax-deferral benefits](https://www.realized1031.com/blog/1031-exchanges-and-dsts-a-passive-ownership-option-for-real-estate-investors). ### Understanding Composite Returns One solution for nonresident investors is called the composite return, which is essentially a group filing mechanism. This type of return is a [joint state income tax filing](https://www.thetaxadviser.com/issues/2014/mar/tpm-mar2014/#:~:text=A%20composite%20return%20is%20an,electing%20members%2C%20as%20one%20group.) made by the sponsor on behalf of all nonresident investors. The DST pays the tax collectively, eliminating the need for individual filings. You also enjoy other benefits, like the following. - Reduced paperwork - Centralized payment - Compliance assurance - Peace of mind, especially for those who are part of large DSTs There are certain trade-offs to keep in mind. Primarily, [composite returns](https://www.realized1031.com/blog/what-is-a-composite-tax-return) follow the highest applicable marginal rate. This means that you forfeit the ability to claim personal deductions, exemptions, and tax credits. ### When Do Composite Returns Make Sense? Not all situations call for leveraging composite returns — they make the most sense in scenarios like the following. - **DST Owns Assets Across Several States: **Composite returns would be helpful to investors, rather than juggling multiple filings. - **Your DST Interest Is Small: **In this case, the trade-offs are minimal compared to the expense of hiring multiple accountants for each state. - **You Live in a No-Income-Tax State: **If your home state doesn’t tax DST income, joining a composite return can prevent mismatched credit issues or double reporting. - **It’s an Included Service: **Many DSTs already offer composite returns, especially if they own multi-state assets. This added perk helps simplify investor participation and ensures compliance. ### Final Thoughts on Managing DSTs With Multi-state Properties Since DSTs typically own several properties across multiple states, filing income tax for each state becomes a bureaucratic nightmare for investors. Composite returns can serve as a comprehensive and streamlined solution, but you’ll be sacrificing a few tax benefits. As such, it’s important to consider whether your situation can benefit from composite returns. Always check with your tax advisor to determine if such a strategy can help you save more and maximize your investment. **Sources:** [https://www.thetaxadviser.com/issues/2014/mar/tpm-mar2014/](https://www.thetaxadviser.com/issues/2014/mar/tpm-mar2014/#:~:text=A%20composite%20return%20is%20an,electing%20members%2C%20as%20one%20group) [https://taxfoundation.org/data/all/state/state-income-tax-rates/](https://taxfoundation.org/data/all/state/state-income-tax-rates/) [https://www.delawareinc.com/blog/what-is-a-delaware-statutory-trust/](https://www.delawareinc.com/blog/what-is-a-delaware-statutory-trust/) Download The Guide To DSTs [![The Investor's Guidebook To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-250.png?width=250&height=250&name=DST-eBook-250.png "See if Delaware Statutory ...") ](https://www.realized1031.com/blog/state-sourcing-of-dst-income-for-nonresidents-and-when-composite-returns-make-sense#blogform) Download eBook ---   --- ### The Investor's Guidebook To DSTs ![Download The Guide To DSTs](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/DST-eBook-550.jpg?width=550&height=650&name=DST-eBook-550.jpg) See if Delaware Statutory Trusts are right for you. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "Investing in a Delaware Statutory Trust (DST) gives you access to income from several underlying properties within the DST. This structure offers benefits such as enhanced diversification and revenue from institutional-grade assets. Tax-deferral benefits, at the federal level, are also applicable when you finish a 1031 exchange through a DST. As you earn monthly distributions from the profits of the DST operations, you’re also beholden to income tax at both the federal and state levels. The latter presents a problem when DST properties are scattered across multiple states. How do you go about DST income tax in such a scenario? Realized 1031 shares insights below, including strategies you can use, like composite returns. Let’s take a closer look! What Is State Sourcing for DST Income? DSTs own assets across multiple states. As these properties earn income, investors who own DST interests “source” their profits from the state where each respective property sits. Every state has its own rules regarding income taxes. For example, Texas doesn’t levy income tax at all. Other areas, like California, charge up to 13.3% for those within the highest brackets. Filing income taxes for each property under the DST becomes challenging due to this variance, particularly for nonresidents of the state. You may face a patchwork of filing obligations, which takes effort, time, and money to handle. Many investors fail to anticipate this complexity, especially if they are too focused on the federal tax-deferral benefits. Understanding Composite Returns One solution for nonresident investors is called the composite return, which is essentially a group filing mechanism. This type of return is a joint state income tax filing made by the sponsor on behalf of all nonresident investors. The DST pays the tax collectively, eliminating the need for individual filings. You also enjoy other benefits, like the following. Reduced paperwork Centralized payment Compliance assurance Peace of mind, especially for those who are part of large DSTs There are certain trade-offs to keep in mind. Primarily, composite returns follow the highest applicable marginal rate. This means that you forfeit the ability to claim personal deductions, exemptions, and tax credits. When Do Composite Returns Make Sense? Not all situations call for leveraging composite returns — they make the most sense in scenarios like the following. DST Owns Assets Across Several States: Composite returns would be helpful to investors, rather than juggling multiple filings. Your DST Interest Is Small: In this case, the trade-offs are minimal compared to the expense of hiring multiple accountants for each state. You Live in a No-Income-Tax State: If your home state doesn’t tax DST income, joining a composite return can prevent mismatched credit issues or double reporting. It’s an Included Service: Many DSTs already offer composite returns, especially if they own multi-state assets. This added perk helps simplify investor participation and ensures compliance. Final Thoughts on Managing DSTs With Multi-state Properties Since DSTs typically own several properties across multiple states, filing income tax for each state becomes a bureaucratic nightmare for investors. Composite returns can serve as a comprehensive and streamlined solution, but you’ll be sacrificing a few tax benefits. As such, it’s important to consider whether your situation can benefit from composite returns. Always check with your tax advisor to determine if such a strategy can help you save more and maximize your investment. Sources: https://www.thetaxadviser.com/issues/2014/mar/tpm-mar2014/ https://taxfoundation.org/data/all/state/state-income-tax-rates/ https://www.delawareinc.com/blog/what-is-a-delaware-statutory-trust/", "articleSection" : [ "Delaware Statutory Trusts (DST)" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2025-12-13T15:00:00+0000", "datePublished" : "2025-12-13T15:00:00+0000", "description" : "Learn more about state sourcing of DST income for nonresidents (and when composite returns make sense).", "headline" : "State Sourcing of DST Income for Nonresidents (and When Composite Returns Make Sense)", "image" : { "@type" : "ImageObject", "height" : 1193, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1556982804-modified-7a0bbf79-21dd-44a9-9364-505e43030cf2.jpg", "width" : 2121 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/state-sourcing-of-dst-income-for-nonresidents-and-when-composite-returns-make-sense", "name" : "State Sourcing of DST Income for Nonresidents (and When Composite Returns Make Sense)", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/iStock-1556982804-modified-7a0bbf79-21dd-44a9-9364-505e43030cf2.jpg" } ```