If you sold a home located in CO, you had a capital gain and your CO home does not meet the home gain exclusion, then you will need to report as the sale of a second home on your federal income tax return, a CO nonresident state income tax return and your CA resident state income tax return. You will get a state tax credit in CA for any CO state income taxes paid on this CO located property sale.
If you have a capital loss on the sale of a personal use property, you will not need to report this loss for federal or state tax filings because the IRS does not allow the recognition of a capital loss on personal use property.
Home gain exclusion -
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. See Sale of Your Home for more information on the exclusion.
You do not need to enter or report the sale of your primary residence if:
- You never used your primary residence as a rental or took home office deduction
- You have a loss on the sale of your home (Personal capital losses are not reported on your tax return)
- You did not receive a Form 1099-S and
- You meet the home gain exclusion.