I live in Atlanta, GA. We sold our second home in Indiana which we've owned for over 40 years. We have over $200,000 in gain on the sale of the property. What are the implications in terms of taxes due to the state of Indiana and when do we have to pay the capital gains to the Federal Government on the sale?
You will report the sale on the tax return for the year in which the sale was completed. Capital gains will be accessed and need to be paid for the federal government and for the state of Indiana. Those will be due at the same time as the tax return for the year of the sale.
to avoid penalties for underpayment of estimated taxes you have to meet one of the rules below.
There will be no federal penalties for not paying in enough taxes during the year (underpayment penalty) if Federal withholding
1) And timely estimated tax payments equal or exceed 90% of your 2021 tax or
2) And timely estimated tax payments equal or exceed 100% of your 2020 tax (110% if your 2020 adjusted gross income was more than $150K) or
3) the balance due after subtracting taxes withheld from 90% of your 2021 tax is less than $1,000 or
4) your total taxes are less than $1,000
state laws differ
if you don't meet the exceptions above you will be subject to underpayment of estimated tax penalties (FORM 2210)
if you can't use exceptions 3) or 4) then you use the lower 90% of 2021 tax or 110%/110% of 2020 tax
25% must be paid in on or before each of these dates 5/17/2021, 6/15/2021,9/15/2021 and 1/17/2021
or you can use the annualized installment income method if that produces a lower penalty but it's not easy to use because you must determine your income for 1/1-3/31, 1/1 - 5/31 1/1 - 8/31, and the easiest for all of 2021
https://www.irs.gov/pub/irs-pdf/f2210.pdf
A capital gain on the sale of real estate located in Indiana is taxable by Indiana, as well as by your state of residence at the time you receive the proceeds.
Indiana taxes capital gains as regular income, so the gain will simply be added to your taxable income on your 2021 Indiana tax return.
In addition to paying a federal estimate, you may want to pay an estimate to Indiana, so as to avoid a large tax bill next April. Here are the details on that:
https://www.in.gov/dor/individual-income-taxes/payments-and-billing/estimated-tax/
Your gain will also be taxable by your resident state of GA, but you'll be able to claim a credit on your GA return for the taxes paid to IN, so you won't be double-taxed.