For out-of-state rental property sales, in which state return is capital gains taken, the state where the property exists or the state of residence?

[Steve-T-]

I live in GA and work and owned a rental property in SC. I file returns in both states. I sold the rental property in SC. On which return is cap gains taken, GA or SC?

[KarenJ · Accepted solution]

You need to report the capital gain in both states. I assume that in prior years you have filed a Georgia resident return and a SC nonresident return. 

You will need to do the same this year.  In TurboTax, it is important that you prepare your SC nonresident return first including your rental sale (as it is in SC) and your wage income.  After that, prepare your Georgia resident return including all your income (required by residents of GA) and you will be able to take a credit on the Georgia return for the taxes you paid in SC. Doing the states in this order will allow TurboTax to determine your tax credit. 

[Steve-T-]

Thank you for the quick response.  I've been doing that for years.  Don't know why I thought that this would be different. Thanks again.  Steve T.

[Jennifer J]

A similar question, with a slight twist.  We are residents of WA, no state capital gains tax, and sold a rental property in GA.  As a non-resident, do we pay capital gains tax on the sale in GA?  There is no WA tax credit against it. 

[Critter-3]

As a non-resident, do we pay capital gains tax on the sale in GA?    

Yes you do even if your resident state has no income tax. 

[iowadavid]

Hate to ask you a followup question based on a two year old question, but I live in IA and sold a rental house in CA.  I also have rental property in IA. I have indicated I have income in CA on TurboTax.  I opened my CA state forms first and it does not show the capital gains from the CA home sale.  They do show in IA.  What can I do to fix this?

[RobertB4444]

You need to file your non-resident state first.  Delete the Iowa and California returns and then start over, completing California first.  Then create Iowa  all over again and it should show a credit for taxes paid to California.

[Aquasure]

I have a slight twist as well. 
I'm a Georgia resident and my spouse and her sister inherited a house in NC from their mother in 2019. 

We sold the house in 2021 and did not generate income from home.  Did not rent it out.
We would go up for a week or so at a time to clean it up as we prepare it for sale.
It was not a rental home, so would it be similar that I do NC non-resident return first, and would we get credit on Georgia state taxes for taxes paid to NC?
Thank you. 

[MarilynG1]

If you have any Capital Gains on the sale, your resident state will give you credit for income tax paid to North Carolina on the gain. 

Click this link info on How to File a Non-Resident State Return.

When you report the sale of the North Carolina home, be sure to use the FMV as of the date of death, and add the cost of any improvements to the 'Cost Basis' when reporting the sale. Travel expenses are not deductible since it was not a business property. 

This link has detail on How to Enter Sale of Second Home, Inherited Home or Land.