How to report sale of NR rental property in South Carolina state return

[sushi_lover_100]

I am a resident of MA and sold a rental property in SC this past year.

I filed an i-290 with SC and the at the sale, they withheld taxes as 7% of recognized gain.

In turbotax, I reported the sale of rental property on my federal return, which showed up as a capital gain after taking the 1099-S value and subtracting the cost basis.

1) How can I report the sale's gain on my SC state turbotax return so that it is properly related to the "Sale of Non-Resident withholding" (ie i-290) amount that I entered on the SC form?

I tried to input the gain as a capital gain in the SC return, but that made it a 5% cap gain, and my MA return sees it as 5% income and says it is not creditable.

2) How can I have my MA return properly reflect the SC tax paid so I don't pay tax twice on my SC sale?

Thanks!

[ErnieS0]

South Carolina and Massachusetts start with federal income so you should not adjust the capital gain.

The 7% withholding on Form I-290 is a standard withholding amount. It’s not the actual tax due. It’s the same principal as withholding on a W-2. Your actual tax is different because you get a refund or have to pay because you withheld too much or too little.

Enter the withholding as additional withholding.

1. Type estimated tax payments in Search in the upper right
2. Select Jump to estimated tax payments
3. Go to Other Income Taxes Paid in 2021
4. Select Withholding not already entered on a W-2 or 1099 and enter the amount from Form I-290. 

[sushi_lover_100]

Thanks @ErnieS0 

I tried adding it to the "Other taxes paid" and attributed it to SC, but on my SC1040 form, it puts this in SC income (line 16), rather than attributing it to "Sale of Real Estate by a Non-Resident" (line 19).  I'm not sure if it matters which line it goes on, but I'd assume it does since there is a separate line in the SC1040 for this case.

Also, turbotax brings over my federal capital gains as information into the SC non-resident section, but i am required to put in the portion attributable to SC, and also the "Net Capital Gains With More than One Year Holding Period", or else it does not do any calculation of State Tax refund due me (I am due the 44% discount on capital gains from SC).

Lastly, I assumed that my MA tax would give me credit for tax paid on the capital gains in SC, but it is skipping over this completely, as it sees it as income in SC.  Is there any way to get this so i am not taxed by both states for the property sale in SC?

[ErnieS0]

You can’t enter a number on line 19 of SC-1040 unless you have TurboTax CD/Desktop and use the Forms mode. This does not work on TurboTax Online.

How do I switch from TurboTax Online to TurboTax CD/Download?

1. Tap Forms in the top right
2. Find Form SC 1040 in the left column (Forms in My Return)
3. Select Form SC 1040 and enter the amount on line 19 instead of line 16

Yes, you will have to manually calculate the capital gain attributable to SC because TurboTax does not know what that amount is.

Massachusetts does allow a credit for SC tax paid on capital gains.

1. On Taxes Paid to Another State, select Add Another Jurisdiction if you do not see South Carolina
2. Select South Carolina on Other Jurisdiction
3. Select Yes on Income Taxed by South Carolina
4. On Income Taxed by South Carolina select short- or long-term capital gains
5. Enter your income and SC tax