topic state capital gains tax deductible on federal return? in Deductions & credits

state capital gains tax deductible on federal return?

s111 — Mon, 23 Feb 2026 11:14:20 GMT

In 2019, I sold a vacation home in Montana. I did not realize that Montana had a capital gains tax. I was notified in 2021 and paid approximately $5000.00 to the state. Can I deduct it from my taxes as a property tax or other tax on my 2021 tax form?

Re: state capital gains tax deductible on federal return?

Anonymous_ — Wed, 04 Jan 2023 17:22:57 GMT

You can deduct state and local income taxes (as well as property tax) but there are limitations and you would have to itemize your deductions on Schedule A.

See https://www.irs.gov/instructions/i1040sca#en_US_2022_publink53061xd0e667

Re: state capital gains tax deductible on federal return?

Mike9241 — Wed, 04 Jan 2023 17:27:22 GMT

yes you can deduct the $5000 less any penalties or interest included.

the deduction would go on federal schedule A under state income taxes for the year paid. if your tax deduction on schedule A is already $10,000, there will be no federal benefit. so there would be no purpose in filing an amending federal return. federal tax laws for 2021 limit the schedule A deduction for income and property taxes to the $10k

however, if you have a resident state income tax that also taxed the gain you should be able to claim a tax credit because the income was double taxed.