I worked through the Virginia state return questions, married filing jointly, and entered that our only state income was a capital gain realized on a rental house we sold. However, on all the forms it includes info from other states: mortgage interest paid on other houses, real estate tax paid on other houses, charitable donations, and it all adds up on the VA Schedule A to give us a huge itemized deduction (just about what belongs on our federal tax return). I am almost positive we are not supposed to itemize deductions since we weren't Virginia residents the whole year, and our only income was about $50,000 in capital gain. But I can't find any way to change it, or to say we don't want to itemize deductions for the VA return (it seems to grab the info from our federal return). It also states our federal AGI as the VAGI, but my husband is military and I had no working income in VA.
A couple of possible complicating factors:
1. It keeps asking what VA county my self-employed business is in, so I leave it blank because my business hasn't been in VA for 2 years. My business info properly lists my current state. But maybe Turbotax is confused because my business once was in VA?
2. We reported the sale as our primary home because we met the federal exclusion for capital gains for military (lived there 3 of the last 12 years). The only capital gain was the amount we had previously depreciated when it was a rental property.
I guess I can do it by hand, but I paid $40 for the additional state return, so it would be pretty annoying to have it just not work! Am I missing something?
Also, can I consult Turbotax advisers at all? I thought I could pay extra for that, but now I'm thinking that option is only for the online version and I got the download. :(
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For nonresidents, Virginia first computes your total income as if you were a full year resident. The Virginia Nonresident tax return starts with your federal adjusted income. It will also use your federal Itemized deduction, which is what you are seeing. It then calculates the Nonresident Allocation Percentage by using your total income and your Virginia-only income then applies that percentage to the total taxable income to get the Nonresident taxable income. It then applies the state tax to that amount. (See below)
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