Tax implications of sale of Florida property while a resident of the District of Columbia

[Andy79]

I am a resident of the District of Columbia but own a house (a rental property, not a primary residence) in Florida and am planning to purchase a different house in Florida later this year, at which point I would establish residency in Florida.  If I sell the Florida rental property prior to the time I establish residency in Florida, it appears that the sale of the Florida house would be subject to tax by the District of Columbia--is that correct?  How would the taxation differ if I waited to sell the Florida rental property until after I had established residency in Florida?  Does it matter whether the property sale occurred in a year in which I was a resident of the District of Columbia for part of a year?  Would there be any differences based on the portion of the year I was a resident of Florida/the District of Columbia?  

[Carl]

it appears that the sale of the Florida house would be subject to tax by the District of Columbia--is that correct?

Yes. Each state taxes your worldwide income.  (DC in your case). Since FL does not tax personal income, you get no break on your DC taxes for any taxes paid to another state.

How would the taxation differ if I waited to sell the Florida rental property until after I had established residency in Florida?

You get to keep more of any gain realized on the sale, and would only pay federal taxes on that gain.

Does it matter whether the property sale occurred in a year in which I was a resident of the District of Columbia for part of a year?

Don't know for a fact one way or the other. But it could.

Would there be any differences based on the portion of the year I was a resident of Florida/the District of Columbia?

Again, don't know for sure. But if you move to FL in say, 2023 and get your residence established that same year, you'd be filing a part-year resident return for DC.  So as to remove any probability of DC laying claim to taxing any of your gain, I'd wait until 2024 to close on any real estate sale in FL.  

One thing you should do is visit the county website for where ever you plan to be in FL, and see what you need to do to establish residency. For example, you should file a "Declaration of Domicile" at the county courthouse of where you will establish that residency, as soon as you are in FL with no plans to return to DC and no ties to DC. (Such as still owning a house in DC). You can get more basic information at https://www.wikihow.com/Become-a-Florida-Resident

[Vanessa A]

If I sell the Florida rental property prior to the time I establish residency in Florida, it appears that the sale of the Florida house would be subject to tax by the District of Columbia--is that correct?   That is correct.  

How would the taxation differ if I waited to sell the Florida rental property until after I had established residency in Florida?  Since Florida does not have an income tax, you would not be taxed on any gain on the sale of the property if you were a resident of FL at the time you sold the house.

Does it matter whether the property sale occurred in a year in which I was a resident of the District of Columbia for part of a year?  No, not if you are not a resident at the time of the sale.  If you move during the year, you will file a DC Part Year resident return (by checking the box on the DC 40) and only include the income during the time you were a resident. 

Would there be any differences based on the portion of the year I was a resident of Florida/the District of Columbia?  Probably not, as the instructions for the DC 40 specifically state to calculate the income you received while a resident and non resident.  You are separating your income, therefore, DC is not taxing your non resident income.