Capital gains on stock sold while living in Illinois then moved to SC

[DA0831]

In January of 2021 we sold stock at a significant gain to by a new house in South Carolina. We moved and will be full time residents of SC as of April of 2021. I assume all the gain is taxed by Illinois. How do I exclude this income from my SC taxes?

[BillM223]

The instructions for South Carolina have this curious instruction:

"What is my residency status if I moved into or out of South Carolina during the tax year? You are a part-year resident and may consider yourself a full-year resident or a nonresident.

• If you file as a full-year resident, file the SC1040. Report all your income as though you were a resident for the entire year. You will be allowed a credit for taxes paid on income taxed by South Carolina and another state. Complete the SC1040TC and attach a copy of the other state's Income Tax return.

• If you file as a nonresident, file the SC1040 with the Schedule NR. You will be taxed only on income earned while a resident in South Carolina and income from South Carolina sources. You will prorate your deductions. All personal service income earned in South Carolina must be reported."

So, if you have income in Illinois that you don't want to report in SC (your stock sale), you have to file as a part-year nonresident. This question is asked very early in the SC interview. This is not obvious.

Once you pick this choice as a part-year nonresident, in the SC interview, you will see one or more screens with the title of "South Carolina Part-Year and Nonresidents", where TurboTax will list federal income items, and you can indicate which should be taxable in South Carolina.

[DA0831]

Thank you for the prompt reply. I was heading down that path, but want to file for the 4% SC property tax assessment (vs 6% as a non-resident). I am concerned that filing the way you have described may prohibit me from claiming resident status for property taxes in 2022. Any thoughts on this and/or alternatives you can suggest?

[DA0831]

Can I simply put the Illinois Capital Gains on line 2, line h of the SC1040

Line h: Out-of-state income/gain

Enter:
• income from out-of-state rental property
• income from a business located outside South Carolina, or
• gain from real property located in another state.
Enter the amount as reported on your federal return. Check the appropriate box to indicate the type of income or gain)

I was going to put the IL capital gains here, but the categories didn't match and Turbotax is pretty stingy on the number of letters I could use to describe it as (IL capital gains on stock).

[RobertB4444]

@DA0831  You're going to need to file as a full year resident if you want SC to view you that way.  So all of your income will be seen as SC income and taxed by them.  But before you do the SC return first do the Illinois return as a part-year resident.  Illinois will tax the earnings that you had there and you will deduct the tax that you pay them from your SC return.  So even though the stock sales will show on both returns you will only be taxed once.  Just make sure to delete the state returns that you have started and finish Illinois first so that the system can calculate your tax deduction.

[DA0831]

Thank you, RobertB4444. I will give that a shot and let you know how it works.

Thanks, again!

[DA0831]

RobertB4444,

Thank you for the assistance, doing the Illinois first appears to have solved the issue.

Thanks again!