Sold my Maine home while living in Michigan. I have no other income for Maine in 2015. Maine withheld 2.5% revenue tax at the time of sale. How do I go about filing this?

[skeller_buccanee]

My home in Maine was previously my primary home and has been used for no other purpose. At the time of the sale, I was a resident of Michigan. The house was not sold at a loss, but the profit margin was small. Maine withheld 2.5% at the time of sale. I do not know how/where to file the withheld amount or if I even need to file a Maine return at all. I do not want to be charged additional Maine tax in error if I do not make it clear that the amount was already withheld for me. Please help.

[DS30]

Since the property was located in Maine, you will have ME- source income related to the sale.

However, you may be able to receive a refund of your ME withholdings if the home qualifies for the federal home gain exclusion. If it does not qualify, you will need to report the sale on an ME nonresident state income tax return but you will be able to take a create for these ME state income taxes on your MI resident state income tax return.

You may be can take the gain exclusion as long as you considered the home your "primary residence" for 2 of the last 5 years.  You could live in it for two years and then rent it for three years and then sell it (so long as it is sold within the five year mark from when you first lived in it as your primary residence). If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. 

See  Sale of Your Home for more information on the exclusion.

If you meet the exclusion, in order to get the full refund of your ME state income tax withholdings, you will need to file a nonresident ME return but report zero "0" income from ME. You must mail in this ME nonresident state income tax return and include a copy of your federal return. You will want to include an explanatory statement with your ME return stating your situation (that your ME home sale qualifies for the federal gain exclusion and therefore your ME withholdings were held in error).

Here is additional information about filing in multiple states (select "see more answer" to view the entire attachment)

https://ttlc.intuit.com/replies/3300797

According to the ME Department of Revenue;

Maine Law requires, at the time of closing, a buyer to withhold 2.5% of the consideration price ($50,000 or more) from any nonresident individual, estate or business. This 2.5% withholding is an estimated tax payment to ensure that a seller complies with Maine income tax responsibilities.

The Maine real estate withholding amount is merely an estimate of the income tax due on the gain from the sale of the Maine property. A Maine income tax return must be filed to determine the actual tax due on the gain and whether or not a refund is due to you. In some cases, an additional amount may be due with the Maine income tax return filed.

However, Form REW-5 must be completed to request an exemption or a reduction in the real estate withholding amount. Exemptions are generally granted when there is a loss on the sale of the property, a federal exclusion of the gain on the sale of a principal residence, the transaction involves a like-kind exchange, or for other situations resulting in no Maine income tax liability

For the sale of personal residence

You will not be allowed to take a capital loss for a personal use capital asset. Also there is no reporting requirement if the property meets the home gain exclusion (unless you received a 1099-S).

You can take the gain exclusion as long as you considered the home your "primary residence" for 2 of the last 5 years. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse

To enter the sale of your home in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Less Common Income”
5. Choose “Sale of Home (gain or loss)” and select “start’

If the property does not qualify for the home exclusion, you will report this as the sale of a second home in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on” (jump to full list or see more income)
4. Scroll down the screen until to come to the section “Investment Income”
5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
8. Choose type of investment you sold - select Second Home
9. Some basic information:
1. Description –  Usually the address of the property sold
2. Net Proceeds – Net proceeds from the sale 
3. Date Sold – Date you sold the property
10. Tell us how you acquired the property - purchased
11. Any business or rental use? - if no, then select personal use only (Please note, if personal use only, you will not be able to deduct the capital loss since no capital loss is allowed for a personal use capital asset.)
12. Some Basis information
1. Date Acquired
2. Original cost basis
3. Cost of improvements

[AlphaDogFutures]

My situation is almost identical to the one described in the original question: I am a Michigan resident who sold land in Maine in 2019 at a slight gain. I know I will be filing a ME tax return, but my question is regarding the 2.5% withholding by the state of Maine that was taken at the time of sale. Do I enter that 2.5% withholding as a state or local estimated tax paid in 2019 on my federal return? Any suggestions would be greatly appreciated.

[DianeC958]

Yes, you enter the amount that was withheld at the time of the sale for Maine taxes as an Estimated Payment in the Federal Section of TurboTax.

To enter the amount go to

• Deductions & Credits
• Estimates and Other Taxes Paid
• Estimates
• State Estimated Taxes for 2019

@AlphaDogFutures

[mkkh2]

Maine Dept of Revenue mentions form REW-1-1040 for Real Estate withholding for non-residents. Do I put amount paid to Maine on that form instead of in State Estimates? If I put amount in State Estimates, wouldn't that not then generate the correct form, REW-1-1040?

[Hal_Al]

Q .Do I put amount paid to Maine on form REW-1-1040  instead of in State Estimates?

A. No.  That form was filed by the buyer (and/or his agent) back when the house was sold.

You have to now file a regular, non resident, ME tax return to get a refund.  

[congokelly]

I tried to follow these instructions, using Turbotax Home and Business, but I never get a menu for reporting capital gains on the sale of a second home. I am a resident of North Carolina and a nonresident of Maine, where I sold a second home, and Turbotax seems to include the capital gain in my North Carolina taxes. All very confusing and unhelpful.

[HopeS]

Assuming your home was a second home and not a rental property you should enter the sale in "Less Common Income".

Click on Sale of Home (Gain or Loss). Continue through the Interview. See the Screenshot below.

 If you are a resident of NC then all your income will be taxable in NC regardless of where you earned it.  Therefore, you should also prepare a non-resident return for Maine which you should complete before the resident return. You should receive a credit on NC for the taxes paid to Maine for the capital gain.

How to file a Nonresident State Return

@congokelly 

[Hal_Al]

As a NC resident, all your income is going to be taxed, by NC, even the gain from the  sale of property in ME.  The Gain will also be taxed by ME.  But, NC will give you a credit, or partial credit, for the tax you pay to ME.  Do the ME return first, so TT can calculate the credit.