topic State tax on capital gain for selling a property in old state after moving to a new state in State tax filing

State tax on capital gain for selling a property in old state after moving to a new state

junjunjun — Tue, 09 Mar 2021 23:05:00 GMT

I moved permanently from California to Oklahoma in July.

I have a property (my primary residence in California) which is listed by my agent before I leave.

The property actually got sold in early August.

I prepare to file state tax for CA and OK as part-year residents.

I know that I have to pay the income tax for selling this property (since the profit > 500k) to CA.

But my question is do I need to pay income tax for the profit of selling the property to OK?

Also if I sold the property before I leave CA, do I need to pay tax to OK?

Re: State tax on capital gain for selling a property in old state after moving to a new state

DavidD66 — Tue, 09 Mar 2021 23:26:56 GMT

If you sold the property while you were a resident of Oklahoma, it is taxable by Oklahoma. If you sold the property while still a resident of California, it is only taxable by California. If you include the sale on your Oklahoma return, you will receive a credit for taxes paid to other states for the tax you owe to California.

Re: State tax on capital gain for selling a property in old state after moving to a new state

junjunjun — Tue, 09 Mar 2021 23:36:59 GMT

Thanks, seems for my case I need to report tax for this sale to OK.

But in terms of the credit, I only found https://www.ok.gov/tax/documents/511TX-14.pdf from OK tax agency, which says "income from personal services performed in another state" qualifies the credit.

Does the sale of my property really eligible for the credit in OK?

Re: State tax on capital gain for selling a property in old state after moving to a new state

ToddL99 — Thu, 11 Mar 2021 21:15:45 GMT

No, the sale of your property in CA would not qualify for a tax credit from OK - that credit only applies to "earned income" (i.e. from the performance of personal services).

You should, however, treat the sale of the CA property as occurring while you were a resident of CA - you placed the home on the market while living in CA, it was located in CA , it closed very close to the time you relocated to OK and any gain you had on the sale was attributable to your time in CA (not the month or so it took to sell after you left). In tax terms, there wasn't any OK nexus (connection) to the sale of this house, so it shouldn't be treated as OK income.

There is no fine-line test that determines the date you become a resident of a new state or country, as long as you are reasonable in its selection.

The date you choose as the first day of residency can coincide with one of the following events:

You or your spouse arrived in the state or country
Your belongings arrived
You or your spouse started work
You started renting your new place
You purchased your new home
You or a family member enrolled in school
You or your spouse registered to vote
You or your spouse applied for a state driver's license