@heartgems68 wrote:
Yes
Super. So what happens is, you must report the sale of the house on your federal return, and it will flow to the state return like usual. On your state return, you will get credit for this amount as part of your state income tax withholding (it's a state tax payment for income taxes, similar to any other estimated state taxes you paid or your w-2 withholding.). You will probably need to enter it into Turbotax as a state tax payment (Estimates and other taxes paid). Then, if your total state tax owed is less than your total payments and withholding, you get a tax refund.
As a state tax payment, turbotax will automatically include it as a federal tax deduction along with your other state taxes (but your deduction may be capped by the $10,000 cap on state and local income taxes.) It's not a deductible tax in California because CA state income tax is not deductible on a CA state return.
You report the sale of the inherited home under the income section for "Sales of stocks, bonds and other investments." Use the category "Something else" for what you sold. Only use "your home" if you personally lived there. For the date acquired, use the date of your mother's death. For the price or value, use the fair market value on the date of her death. For the selling date and sales price, use those figures from the sale. (Actually, for all these values, use your share of the total. For example, if the home was inherited equally by 3 siblings, use 1/3 the sales price and 1/3 the fair market value.) If you sell the property close in time to the death of the previous owner, the fair market value will equal the selling price and you will have no taxable gain. If you held the property for a long time, you might have a gain, and you might need an appraisal from when your parent died to get the fair market value at that time.
Since in most cases, selling an inherited house does not count as taxable income, you will get this 3-1/3% withholding back from the state as part of your state tax refund.
