State of Hawaii N-11 Line 18 - Automatically Filled

[ToughQuestions]

Aloha,

I've recently posted an issue I was having with inputting data from a property sale in another state (Nevada) into my Federal returns. However, I think the method of which I inputted the information caused another issue in my state return.

Former TurboTax Thread on Property Sale 

I ended up filling that portion with 100% of my half of the cost basis, proceeds, etc. Prior Depreciation, I kept the same at $24,007. There was a section somewhere I didn't understand that I can't get back to that asked about depreciation in State of Hawaii and it said "if you don't know, just input the federal amount" but I actually placed "0" and now I can't find that menu.

What I would like to know is how Line 18 of the N-11 is automatically calculated because it listed $101,470 - I can't delete it or edit it. It seems to have a mind of it's own and it's deflating my total taxable income for State of Hawaii so bad, it looks like I worked at McDonalds this year.

Where should I begin to look for the cause of this issue or is it absolutely fine because of some back end work and the property being in a state with no income tax. Please help me understand or fill you in on what's happening so we can properly have this addressed.

Audit meter is right between medium and high and I'd just like it dropped to at least 50% or below.

[ToughQuestions]

For those of you who may be curious, it seems that the cost basis for the property is being written off the state taxes. Which is interesting, but if that's how it works, that's how it works.

[AmyC]

You pay taxes on the gain for both state and federal. Your federal should also have the basis subtracted out.  Sales price $144,000 minus basis = gain on return. The basis is what you paid plus improvements plus sales expenses - depreciation $24,007 + depreciation not allowed.

[ToughQuestions]

Aloha Amy,

I can see that the cost basis is taken out of the Fed and it does list capital gains at around $70,000 in addition to my salary and other pieces. Therefore the Federal AGI seems correct on it's own.

Though, if this is the case, the cost basis is taken out twice from the state tax without any of my own input which makes a whole lot of sense why the Hawaii AGI is so low. It comes out to Federal AGI - Cost basis (a second time) = Hawaii AGI.

I played with the cost basis numbers. Putting all 0s, for example. However, that caused the Line 18 on the N-11 to glitch and grow out of proportion and there's no real good way of fixing this issue.

I may need to manually fill out the state tax form if the implication is that there's double cost basis deductions from the state tax form.

Any suggestions on where to go from here other than to go that route?

[AmyC]

I can't figure out why you have that information on line 18 of the  N11. Going through the program, there is a page Do You Have Any of These Items Not Taxed by Hawaii? which corresponds to that line. Is there a chance you have the Other subtractions box marked? In there, it asks about adjustments to capital gains. You don't need any of that.

 You can fill this form out for someone to call you if you want another set of eyes.

[ToughQuestions]

Aloha,

Same here. It automatically checks a box that says "other subtractions."

Even if I click "none of these apply" it still doesn't negate the previous box. I'll give the form a shot. Thank you.

[oiwi808]

Having this issue where turbo tax automatically added my entire W2 amount automatically. I am able to override it to delete the line but then when I try to e file it says that I shouldn't override the form. It's very frustrating because if I leave it there it says I'm getting a return of over $5000 which I know is wrong. When I delete that line it says I owe $35 which sound much more accurate. 

Anyone know how to resolve this? 

[ToughQuestions]

I'm not sure if my issue was the same, but I will say that I made a new tax return without "importing from last year" then manually filled everything out and eventually it came out to a reasonable number. Not sure if that'll help in your case, but that's what I ended up doing for mine and I think it worked out well.

[aneridgway]

Does Hawaii taxed, or exempt long term capitol gain from out of state property sale? $20k was withheld in escrow and paid to Calif.  After enterring all the info, I got a non refundable credit from Hawaii, now my refund from California is higher than it was withheld, is it possible? or will they refund what I paid and no more.

[AmyC]

1. Yes. Hawaii taxes residents on all federally taxable income. Hawaii does have a capital gains tax vs ordinary tax much like the federal. Since the property was out of state, you can get a credit for any income being double taxed by Hawaii.

If you are a Hawaii nonresident and sold there, you will file a HI return for the sale and receive a credit in your resident state.

2. I am going to assume you are a HI resident and sold property in CA. When you sold the property, they withheld a standard amount as required. You file a tax return and could have a refund or owe depending on the rest of your income. CA does have some credits that are refundable . If you are a nonresident and your only income was sale of property, it does not seem likely that you would get back more than you paid in. That does not sound right.

3.The income also goes on your HI return along with a nonrefundable tax credit, so your situation sounds correct for that part.

Your resident state taxes all income but gives a credit for income taxed by another state.  Please carefully follow these directions to prepare the states in a special order. You may need to delete both states and begin again.

1. First, prepare your non-resident CA return. This creates your tax liability for the non-resident state. How do I file a nonresident state return?
2. Then prepare your resident state HI return and it will generate a credit for your income already being taxed in the non-resident state. 
3. The credit will be the lower of the state tax liabilities on the same taxable income. You may owe your resident state,  if they have a higher tax rate along with differences in how the taxable income is calculated.

It isn't possible for the program to create a credit before it knows the liability. Your returns may be wrong if you do not prepare the states in this order.

4. Without being able to see your CA return, I can't begin to guess at what credits you may have showing or why. Please review your return and reply back with any questions. We are glad to help.

Reference:  HI Instructions  &  2023 Instructions for Schedule CA (540NR) 

@aneridgway