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California treats profits from the sale of a residence as ordinary income, rather than long-term capital gains, and subjects them to higher state tax rates (up to 13.3%). While California generally conforms to the federal exclusion ($250K/$500K) for primary homes, it does not distinguish between short-term and long-term gains, taxing all profits immediately.
See this California Franchise Tax Board webpage for more information.
@MonikaK1 This was not the case for me. It was simply a Turbo Tax system error that caused the gain to not flow through properly. I read online that other people had fixed the issue by deleting the entire house sale section, then re-entering the house sale. That's exactly what I did and it fixed the issue. The gain was the same for Federal and State. It's all fixed for me, but Turbo Tax should be aware of the issue and should try to fix it on their end for other people.
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