Capital Gains and previous State taxes

[joeg836]

We moved from MD to NC in Dec of 2020. I had one additional paycheck from the MD employer that was attributed to 2021 income but MD taxes were withheld. I bought both NC and MD turbo tax software.

Last year (2021) I had to sell stock in a company that was bought out. As a result, I had some capital gains. Turbo is correctly refunding my MD taxes from my salary income but when I enter the capital gains from 2021 it reduces my MD refund. Is this correct? Do I have to pay capital gains tax in a state I was not a resident of when I sold the stock?

[DMarkM1]

No, MD should not be taxing your capital gains in 2021 since you were non-resident there in 2021.  First be sure you are working in a MD non-resident return.  In the "My Info" section you will indicate you only lived in NC in 2021.  On the "My Info" summary page be sure to select that you earned money in another state and select "MD."  

In the MD state interview answer the prior year tax return questions.  Did you file in MD for 2020?  If so what type of return..."Part-year" should be correct since you moved in Dec 2020.  

Eventually you will arrive at a page to allocate the capital gains to the "NON-Maryland" state.  It may have already populated for you.  If not, you need to put in the capital gains amount that belongs to NC.  

[joeg836]

Thanks for the input. I have attempted to follow the instructions but MD still taxes my Capital Gains. I have scanned both NC and MD forms for additional information but have not found fields that would assist. Is there a hidden field or entry that I am missing. Do I need to delete the MD form and re-insert? Right now MD is on top of NC - just shooting for glitches... 

[Rick19744]

A couple of comments/ thoughts:

• Based on your facts, you should be indicating that you were a nonresident of MD for 2021.
  • Did you indicate in TT that you were a nonresident?
• As a nonresident, you should also be completing a form 505NR.  This form allows you to make adjustments to the MD return for items that are not attributable to MD when computing MD tax.
• Also take a look at your form 505.  There are 3 columns there and your capital gain should be reported in column 3 if handled correctly.