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Should two states get to tax a capital gain if I was a year round resident in one

 
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TerryA
Intuit Alumni

Should two states get to tax a capital gain if I was a year round resident in one

If the property was in another state, such as real estate, then that state gets to tax the gain as well as does your resident state. This doesn't apply to intangibles such as stocks, etc.

Your resident TT/state (generally - it's the other way round for a handful of states) will prepare the other state tax credit for you for some or all of the nonresident state's tax on that gain that your resident state is taxing also. Prepare the nonresident state first, then your resident state.

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5 Replies
TerryA
Intuit Alumni

Should two states get to tax a capital gain if I was a year round resident in one

If the property was in another state, such as real estate, then that state gets to tax the gain as well as does your resident state. This doesn't apply to intangibles such as stocks, etc.

Your resident TT/state (generally - it's the other way round for a handful of states) will prepare the other state tax credit for you for some or all of the nonresident state's tax on that gain that your resident state is taxing also. Prepare the nonresident state first, then your resident state.

Should two states get to tax a capital gain if I was a year round resident in one

Do you mind explaining this further? Why would it make sense that a citizen has to pay double state tax on physical real estate property? Thank you.
TerryA
Intuit Alumni

Should two states get to tax a capital gain if I was a year round resident in one

The resident state (generally - sometimes it's the nonresident state) has a credit for some or all of the tax on the nonresident state's return to prevent double taxation. TurboTax computes that for you - complete the nonresident state return first, then the resident state.

Should two states get to tax a capital gain if I was a year round resident in one

I have spent 9 hours with Turbo Tax experts with no solution. 

We sold second home in WV (we are non residents of WV and do not rent the home) and the attorney who brokered the closing calculating our capital gains and paid WV.  When we completed Turbo Tax as residents of Virginia, it also calculated a capital gains tax.  None of the experts know if we need to pay both states or if there is a page in the Turbo tax software to capture the capital gains tax paid to WV.  These are reciprocal states.  Do we need to pay Virginia?  

Hal_Al
Level 15

Should two states get to tax a capital gain if I was a year round resident in one

Q.   Do we need to pay Virginia?  

A. Yes,

 

The reciprocal agreement is only on wages. A capital gain on WV property is WV source income.  You need to file a WV non resident return and pay WV income tax. There's a chance that you'll get some of the withholding* back.   Then you include the gain on your VA return. VA will give you a credit, or partial credit, for the net tax paid to WV. Prepare the WV return first (so TT will know how to calculate the credit on the VA return).

 

Q.  Is there is a page in the Turbo tax software to capture the capital gains tax (withholding) paid to WV?? 

A. Yes.  It's "hidden" in the federal section. 

In TurboTax (TT), enter at:

Federal Taxes Tab

Deductions & Credits

-Scroll down to:

--Estimates & other taxes paid

   -Other Income taxes

On the next screen, scroll down to

     -Other income taxes paid in 2022 

       -  Withholding not already entered on a W-2 or 1022

         -On the next screen, enter the amount of withholding and the state

 

*You said "the attorney who brokered the closing calculating our capital gains and paid WV". You did not actually pay the tax. You just had withholding done, an estimated amount of the tax (the estimates are usually too high). 

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