Sale of Vacation Home in Non-Resident State (live in VA, sold in WV)

[Ron_In_Virginia]

We lived in Virginia 100% of the time in 2024. We sold our vacation home in West Virginia in April 2024. We paid estimated taxes to West Virginia at the time of sale. We entered all the information regarding the sale of the vacation home into TurboTax before we entered any other tax information. TurboTax showed that we would get a refund in West Virginia of a portion of the estimated taxes we had paid. Yay! However, when we enter additional income sources into our Federal return (e.g., W-2, interest earnings, etc.), the West Virginia refund amount changes (it gets smaller!). None of the sources of income were earned in West Virginia (we live and work in Virginia). On the screen where it asks how much of our W-2 and interest earnings were earned in West Virginia, we entered $0.00. TurboTax still reduces our West Virginia refund amount. We understood that we would only be taxed in West Virginia on the capital gains from the sale of our vacation home in West Virginia (and that our other sources of income (none of which were earned in West Virginia) would be subject to taxation in West Virginia). Did we miss something? How do we get this fixed in TurboTax? Is there a box we are not checking? A form that needs to be filled out? Thanks!

[MarilynG1]

Many states start with your Federal AGI and subtract items that don't belong to that state from there, so since you hadn't yet entered all your Federal info, your West Virginia Non-Resident return was not yet accurate.

When you're done with Federal entries, go through the West Virginia interview again and pay close attention to questions asking about income that needs to be subtracted/adjusted. It sounds like this is what you were doing.  The tax you paid to West Virginia at the time of the sale was only a % of the estimated Capital Gains at that time, so you could have additional tax due. 

Here's more info on West Virginia Sales of Real Property by Non-Residents. 

[Ron_In_Virginia]

Thanks. I did go through WV again (after entering W-2, interest, etc. on Federal). I put $0 earned in WV for all those sources of income, but the refund was still lower than it was when I only included the sale of the vacation home in WV (which is the only income that should be taxed in WV). 

[MarilynG1]

Make sure you entered the West Virginia tax you paid at closing, and any Property Tax paid to WV. 

Here's more info on Deductible Closing Expenses on Sale of Home.

@Ron_In_Virginia 

[Ron_In_Virginia]

Thanks. I did that. The issue I am having is that TurboTax keeps adjusting our refund from WV every time I add new income to our Federal return (none of which is taxable in WV because we earned all of it in VA). The only income we earned in WV was the capital gains on the sale of our vacation home located in WV.

[AmyC]

Once you finish your federal return, you will be able to do your WV state return correctly. You need to finish the federal, then do the nonresident state, then your resident state.

The WV return begins with the federal AGI. For a nonresident return, they calculate your tax based on your full income and then prorate it for the WV portion.  It isn't possible to do it before the federal for these reasons.

[Ron_In_Virginia]

Thanks. I did our Federal, then WV, then VA. What I don't understand is why our Federal AGI has anything to do with the WV capital gains tax on the sale of our vacation home. According to the WV dept. of tax website, the maximum capital gains tax rate on the sale is 4.82% (if over $60,000). Ours was over that amount, so we expect to pay 4.82% of our capital gains from the sale of our vacation home (at most - 6.95% was withheld at the sale, so we expected a refund). Our W-2 and interest income (our AGI) should have no relevance. It should be capital gains * 4.82% (for example, $100,000 * 4.82% = $4820 in taxes owed). The amount we owe from the sale should not change based on our federal AGI (which is irrelevant to the sale of the vacation home). That said, I have found the schedule in the WV tax return that shows that they do compare the capital gain to the AGI when calculating the tax owed. It does not make sense, but at least I have the answer. Thanks for your help. Sigh.