Moving states over the end of the year

[Paul_L]

I'm mostly retired, with my income mainly withdrawals from my 401k.  We moved from Arkansas to Michigan over the end of the year.  I changed the address on my retirement account to Michigan on Jan 1, so my withdrawals this year have all been credited to Michigan, but the sale of our Arkansas house didn't close 'til a few weeks later.  When 2022 tax time rolled around I filed as a full-year Arkansas resident.  My hope is that I can avoid having to file for both states and file only as a full-year Michigan resident for 2023.  Will this work, given that the house sale didn't close 'til January - will I still have Arkansas income from the house sale?  Or does it really not matter, and I'm just overthinking this? 🙂

[LoriC17]

Hello,

There are actually 2 parts to this answer.

The first deals with home exclusion. If you have owned your home at least 24 months out of past 5 years and lived in it as a main residence for 24 months out of past 5 years you may qualify for exclusion of income.

It is currently $250,000.00 Long Term Capital gain if MFS and $500,000.00 If Married Filing Joint. There are some other situations and you can read more in depth using the following link.

https://www.irs.gov/publications/p523#en_US_2022_publink10008937

The answer for the state question all depends on rather you believe you will have a gain after the exclusion.

[Paul_L]

Sorry - I'd thought about that we'd had the house for several years while I was mentally composing my post, but by the time I started typing I'd forgotten it!  But, yes, we'd owned the Arkansas house for several years.  There's definitely a gain from its sale (yay!) but it's not to the $250k level. (pout) 🙂

[LoriC17]

Well if you are not filing Married Filing Joint then gain of less than $250,000.00 is not all bad news since that is the limit for exemption of Home Sale Gain.