Why does capital gains on federal return differ from capital gains on state return?

[AnthonyC · Accepted solution]

It means that your state doesn't conform to the federal laws for the treatment of certain capital gains or losses.  Most states actually don't give any preferential tax rate treatment to capital gains and they get taxed just like all other income.  Some states have different limits on the deductibility of losses.  And, some states require certain adjustments because of tax law differences to your capital gain property.