NC Non resident sold vacation rental

[LB641]

We have a NC vacation rental. We are non residents. We have filed our taxes, including NC state tax return using TT each year. When we complete our 2021 TT this year, will TT transfer over to the NC state form, any required information and/or data that NC will require for the sale? Would like to know if TT will know what data to transfer over to the NC state form, or will I need to enter the data, and know what data to enter myself manually into the NC state form? As a non resident of NC, not sure what additional data would be required in the NC state form. TT has completed the NC state form in previous years, along with our Fed forms.

[Bsch4477]

As in the past, when you enter the sale information into the federal form TurboTax will carry the required data to your NC non resident form. 

[SundayInSalem]

North Carolina starts with federal adjusted gross income (AGI) so income from the sale from a rental property will be automatically included on the NC income tax form (Form D-400).

However, federal AGI includes your total income, so you will have to tell TurboTax the amount of Capital Gain and Rental/Royalty Income from the NC rental property. If you did not sell anything besides the rental property (such as stocks), the capital gain on the North Carolina return should equal federal capital gain.

[LB641]

Thank you. If I correctly understand, TT will transfer over to my NC non-resident state form, the capital gains. As long as I have no other capital gains, I would then enter that amount shown in the Federal column, into the box on the NC non-resident state column. Correct? That being said, if NC then taxes me for that capital gain, does that then show up back on the Federal Form as taxes paid to NC? Or is that a non-issue? Again Thanks so much.

[SundayInSalem]

Correct. TurboTax transfers over federal capital gains. If the only capital gains are from the sale of your rental property, the federal amount = the NC amount.

States provide a credit on double taxed income. You can claim an "other state tax credit" on your resident state return up to the amount of resident tax on that income. For example, NC has a flat rate of 5.25%. If you live in Pennsylvania, your flat tax rate is 3.07% so PA will only allow a credit up to 3.07%, not 5.25%. If your state tax is higher than 5.25% you can deduct the amount actually paid to NC.

TurboTax should automatically compute the nonresident credit if you prepare your nonresident return first.

How do I file a nonresident state return?

For federal purposes, you may be able to deduct any NC tax paid on the following year's return. For example, if you filed a 2020 return, you can claim a deduction on your 2021 return because that's the year you actually paid your state income tax.

Federal law limits the deduction for state and local taxes to $10,000 (the so-called SALT deduction). You will have to itemize deductions to deduct state tax on the federal return. Enter the tax paid anyway in Deductions & Credits. TurboTax will do the math for you.

Topic No. 503 Deductible Taxes

[LB641]

@SundayInSalem 

Hello, and thank you.

Vac rental sold in 2021 in NC.  All infor for the rental over the years is in TTx.

"... TurboTax should automatically compute the nonresident credit if you prepare your nonresident return first..."   We typically do not do NC non resident first, as noted in your reply. We do the Fed tax using TTx, completing all of the rental infor, and now the sale. Then TTx does the NC state non-residence form. The sale and capital gains will transfer over per your answer. This will be the only capital gains, so all of it will be NC. If we read your answer correctly, we will have capital gains to pay on the Fed, as well as NC.  We are in FL, and we have no state tax. to claim a double tax.  ".... you may be able to deduct any NC tax paid on the following year's return. For example, if you filed a 2020 (21) return, you can claim a deduction on your 2021 (22) return because that's the year you actually paid your state income tax. Federal law limits the deduction for state and local taxes to $10,000 (the so-called SALT deduction). You will have to itemize deductions to deduct state tax on the federal return. Enter the tax paid anyway in Deductions & Credits. TurboTax will do the math for you..."  No FL state income tax, and we do not itemize.  TTx does not do this automatically? Come 2022, we would not be completing a NC tax form, as the property was sold in 2021. Thank you very much  @SundayInSalem 

[AmyC]

Yes, the federal is done first. The program knows the rental house and will determine your gain/loss.

Next, is the NC non-resident. The program will carry things as it always has.

Since you do not itemize, any state tax paid to NC will probably not change a thing. In 2022, you can always add any state tax paid into the program to see if it helps you itemize. You would have only the federal return for 2022.