I moved Idaho from California in September 2022, and sold my primary home in California in January 2023.
The capital gain for the sale exceeds the $500,000 deduction for federal capital gains tax.
Turbotax state Idaho automatically enters the taxable capital gain as a "qualified" sale of a primary residence in Idaho, and requires an address. However, the residence is not an Idaho residence. Leaving the default taxable capital gain from the federal return in the Idaho taxable gain field, and using the California address, results in a large Idaho tax credit which is clearly not correct. However there does not seem to be a way to change the capital gain to a non-Idaho source. Entering zero in the "qualified" capital gain field still requires an address, and results in a large increase in Idaho tax, which also does not seem correct.
As the capital gain is California sourced income, I believe it should be taxable in California, but not in Idaho.
How should the capital gain be entered in both the Idaho and California state Turbo tax forms.
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Your resident state at the time of the sale will tax the gain on the sale no matter where the property is located. Your nonresident state will also tax the gain on the sale of property located there. You will claim a credit for taxes paid to another state on your resident state return to mitigate the double taxation.
Complete the CA nonresident return before the ID resident return and take note of the income taxed (should only be the gain on the home sale) and the tax liability. Those numbers will transfer to your ID resident return to calculate the credit. You will only need to verify the numbers in the ID return (steps below).
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