Oregon tax on Washington land sale

[reedstrom]

We live in Oregon and owned a 1/2 acre residential lot in Washington for 2+ years intending to build a new house. Building costs got out of hand so we sold the lot in 2022. Washington does not tax the income to us, but I can't find in Oregon tax guidance whether we owe taxes in Oregon on the sale.  Any help would be appreciated.

[MaryK4]

Because you are an Oregon resident, you must report and pay the tax on the sale.  In general, residents pay tax on all income, nonresidents only pay tax on state-source income.  (And normally the resident state will give a credit for taxes paid to a nonresident state but since Washington does not tax income, there is no credit.)

[reedstrom]

Thanks for the quick response! If I may, a follow-up question for you as it relates to "basis".  The land cost XXX, then we spent YYY for a required "water access fee" (from community association) and ZZZ to clear the lot to build. We had other planning, design and permitting expenses, but those were specific to our house plan, but the water access fee and land clearing cost would be required for anyone. Would these be eligible for including in our basis when calculating our capital gain?

[DavidD66]

Yes,you should add the cost of the water access fee and the clearing of the land to your cost basis of the property sold.  

[davej5]

On the previous comment that the Oregon Resident does not get a credit for the tax on sales of the Washington property since Washington doesn't have an income tax, a question.  WA does have a capital gains tax, with a $500/couple exclusion, on the sale of property.  Is this tax deductible in OR?

[Hal_Al]

Q. WA does have a capital gains tax, with a $500/couple exclusion, on the sale of property.  Is this tax deductible in OR?

A  Yes, but not exactly.  You do not get a deduction, you get a credit on the OR return.  The credit is for tax paid to two states on the same income (the capital gain).  The credit is the lesser of the WA tax or the portion of your  OR tax attributable to the capital gain. So, it's possible that the credit from OR may be less than the tax paid to WA.