I live in Illinois and sold a home in Wisconsin. I will be paying capital gains tax on my federal return. Which state(s) would I owe capital gains tax on this transaction? How would that work in TurboTax?

[DawnC · Accepted solution]

You need to file a WI nonresident return.   Here are the instructions.    TurboTax will transfer the information to your state returns.   All income is transferred to your resident state of IL and the home sale will just be on the WI return.   When you do your state taxes, prepare the nonresident WI return first.   If you owe any tax to WI, TurboTax will allow you to take a credit for that on your IL resident return.    Your resident state taxes all of your income, but they will give you credit for taxes you have to pay to another state.   

[unzema]

I'm working on Wisconsin non-resident now and I'm having a problem with not being able to exclude Taxable Interest and Ordinary Dividends from the non-resident return.  It appears TT is auto-feeding all interest and dividends from the Federal return to the non-resident return.  If I understand your guidance correctly, the only income that should be on the non-resident return should be the home sale capital gain.  How does this get adjusted?  There appear to be no prompts in TT to allow me to zero out the interest and dividends.

[DawnC]

There should be a screen that lists all of your federal income - and TurboTax will allow you to enter the amounts from each line that are WI-sourced.   Slowly click through the WI nonresident return until you come to that screen.    It will look similar to the one below, but will reference WI.    @unzema 

[unzema]

The template you are showing looks familiar but the Wisconsin TT form does not present a screen for me to enter WI-sourced amounts for dividends and interest.  I've clicked through the non-resident return many times and it doesn't appear to exist.  I even went into the forms and tried to delete the amounts and it won't let me edit those lines.

[unzema]

OK, so I just went into the forms and right-clicked and it allowed me to "override" the amounts so I did so entering zero for those two lines.  It seems like it is working OK.  Did I do anything wrong?

[DawnC]

You may have an issue with e-filing.   Overriding the entries will void the accuracy guarantee.   In the Wisconsin return, on the screen that says Here's the Income that Wisconsin handles differently, scroll down and click on Edit next to Capital Gains.   

[unzema]

Yes, I did that and was able to adjust my capital gains.  But it never prompts me to adjust dividends and interest.