Help please. Moving from Texas to Utah -- should I wait until July to move to Utah?

[cdixon2]

My house is under contract.  The buyer is flexible as to when I move out of our Texas house.  I can move to Utah as early as end of May or wait until July.   

1) Would there be a tax benefit to wait to move in July?  

2) Will Utah want me to pay Utah income taxes on my Texas home capital gains? 

I entered both dates into TurboTax and it does not seem to matter...but I could be overlooking something.
THANK YOU! 

[guywong]

Since you're moving to Utah permanently, your domicile will be Utah after the move and therefore you will be required to pay Utah income taxes on income you receive from the day you become a Utah resident.  That would include the capital gain from the sale of your TX principal residence.

I'm not in Utah, but I would think Utah conforms to the federal Section 121 rule on a sale of principal residence where a seller can exclude up to $250,000 in capital gain if s/h had resided in that house for 2 out of the previous 5 years (married couples get up to $500,000).  I did a quick search and found this article.  But I can't say if it's accurate.   The article implies Utah conforms to IRC 121, but doesn't say it explicitly.   So you should check it yourself.  If Utah conforms to the Internal Revenue Code and your gain is less than the Section 121 exclusion amount, then I don't see any reasons for delaying your move.

https://www.deseret.com/utah/2022/4/8/23013440/housing-market-tax-selling-your-home-capital-gains-ta...

Here's a copy of Utah income tax return,  TC-40, it starts with federal AGI, so it implies Utah does conform to the IRC, but you should check that yourself.

https://tax.utah.gov/forms/current/tc-40.pdf

Utah part year tax return, TC-40B.  This is the form you will file for 2023.

https://incometax.utah.gov/instructions/tc-40b

[cdixon2]

Thanks so much for your reply!

If it is true that Utah is going to want a % of my capital gains from the sale of my Texas home (if I move to Utah July 5) , I may come back here to stay with family later in year, and open a PO Box to receive my mail.  That way, I could still maintain that I have a residence in Texas.  Would that make sense to do?  TY!

[cdixon2]

Hi Guywong -  Thanks again for responding.  The more I think about it though -- I am wondering...are you sure that I would pay Utah any capital gains from the sale of my Texas house?  The closing is in May 2023.  I won't be moving to Utah until June or July 2023.  

[Hal_Al · Accepted solution]

UT follows the federal tax law on home sale exclusion.  There is no capital gains tax on the sale of your home.  Full rules: https://www.irs.gov/taxtopics/tc701

Q. Are you sure that I would pay Utah any capital gains from the sale of my Texas house?  The closing is in May 2023.  I won't be moving to Utah until June or July 2023.  

A.  If a capital gain, not eligible for the home sale exclusion,  is realized before you become a UT resident, it will not be subject to UT tax. 

[guywong]

@cdixon2  You wrote, "The closing is in May 2023.  I won't be moving to Utah until June or July 2023. " 

None of your income prior to establishing residency in Utah will be taxed by Utah.  So if the TX home is closed before you move to Utah, Utah will not tax you on the gain on the sale of your residence even if you gain exceeds the Section 121 exclusion amount.

From what I've read this morning, it appears you will exclude your TX income on your Utah TC-40a and b forms.

https://incometax.utah.gov/instructions/tc-40b

Follow these steps to calculate your Utah tax:

1. Complete form TC-40 through line 24.
2. Complete form TC-40B, Non or Part-Year Resident Schedule (see line-by-line instructions, below).
3. Complete the rest of form TC-40, beginning with line 25.

Attach form TC-40B to your Utah return.

https://tax.utah.gov/forms/current/tc-40a.pdf

https://tax.utah.gov/forms/current/tc-40b.pdf

[cdixon2]

Thanks again guywong!  You have been a huge help!  I will follow our advice.  Much appreciated!

[cdixon2]

Thank you very much!

[TomD8]

"Would there be a tax benefit to wait to move in July?"

Yes, probably.  The later in the year that you move, the lower the portion of your 2023 income that will be taxable by Utah.