Capital Gain Exclusion or possible taxes in two states? Changed Primary Residence, Home Sale in Different State

[Fang808]

Hello,

Here is my situation, I owned a home from 2019 to 2023 in Maryland and moved to Hawaii on 01/01/2024. I sold the Maryland home on July 2024. I plan to sell my Hawaii home on 01/01/2026. My capital gain from Maryland home is 80k, and possible capital gain from Hawaii home is 100k, From IRS publication 523, I need to report the gain from Maryland home if I want to take the exclusion from Hawaii home in the future. If I choose to do so, which state tax I should file since I am living in Hawaii, but the property is located in Maryland during the sale process??

Thank you in advance.

[KrisD15]

Yes, if the sale was Maryland property you will file a Maryland NON-resident return and claim that capital gain. 

You will next file a Hawaii state return and claim all your income (including the capital gain) however the Hawaii return will give you a credit for the tax paid to Maryland. 

The order you do the state returns is Maryland, then Hawaii so the program can compute the credit on the Hawaii return.  

[Fang808]

Thank you so much!