topic Do I pay CA taxes on a real estate project as a non-resident of CA in State tax filing

Do I pay CA taxes on a real estate project as a non-resident of CA

rdemyan — Sat, 14 Dec 2024 20:11:19 GMT

I invested in a real estate project in CA which was essentially a renovation and sale of an existing single-family home. The entire project took just under one year and I made a profit. I am also invested in other similar deals which construct 4 to 5 unit buildings which are then sold for a profit. These deals will always take more than one year from investment to sale, but to date none of these deals have finished so I have not yet realized any profit or loss. The company that puts these deals together has withheld a portion of my profit from the first project (as stated the other projects have not yet finished) as CA state withholding for non-residents.

1) As a resident of WA, do I have to pay CA taxes on the profits from these real-estate deals?

2) If so, does the time frame of the deal make a difference; i.e less than one year or more than one year or perhaps some other time frame?

3) How do I report these profits in Turbotax premier for 2024?

Re: Do I pay CA taxes on a real estate project as a non-resident of CA

TomD8 — Sun, 15 Dec 2024 15:49:26 GMT

The answers to your questions are:

1. A capital gain from the sale of real estate located in California is taxable by California whether or not you are a California resident.

2. Whether a taxable gain is long or short term makes a difference on your federal return. See this TT help article: https://turbotax.intuit.com/tax-tips/investments-and-taxes/guide-to-short-term-vs-long-term-capital-gains-taxes-brokerage-accounts-etc/L7KCu9etn)

Long vs short term makes no difference on your California return, since California taxes all capital gains as ordinary income.

3. In TurboTax, real estate capital gains are reported in the Investment Income section under "Other".

Re: Do I pay CA taxes on a real estate project as a non-resident of CA

Mike9241 — Sun, 15 Dec 2024 17:48:48 GMT

I'm not sure the holding period matters. You appear to be what the IRS would classify as a dealer in real estate, which makes any gain or loss ordinary. Consult with a tax pro in your state to go over the situation.

Also, what kind of tax form will you receive for the 2024 gain? You could contact the sponsors to find out. If a K-1 is to be issued, how will it be reported?

Re: Do I pay CA taxes on a real estate project as a non-resident of CA

rdemyan — Sun, 15 Dec 2024 19:27:42 GMT

Yes, I forgot that they will be sending me a K-1 as a partnership I believe. So I guess then the information they send me will be entered into a K-1 form on my tax return, which goes over to Schedule E (Income or Loss from partnerships and S corporations). I wonder if it will be considered "Qualified Business Income Deduction".