I moved Idaho from California in September 2022, and sold my primary home in California in January 2023. How is Capital gain input for the two states

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April 12, 2024
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I moved Idaho from California in September 2022, and sold my primary home in California in January 2023.

The capital gain for the sale exceeds the $500,000 deduction for federal capital gains tax.

Turbotax state Idaho automatically enters the taxable capital gain as a "qualified" sale of a primary residence in Idaho, and requires an address. However, the residence is not an Idaho residence. Leaving the default taxable capital gain from the federal return in the Idaho taxable gain field, and using the California address, results in a large Idaho tax credit which is clearly not correct. However there does not seem to be a way to change the capital gain to a non-Idaho source. Entering zero in the "qualified" capital gain field still requires an address, and results in a large increase in Idaho tax, which also does not seem correct.

As the capital gain is California sourced income, I believe it should be taxable in California, but not in Idaho.

How should the capital gain be entered in both the Idaho and California state Turbo tax forms.

DMarkM1

Your resident state at the time of the sale will tax the gain on the sale no matter where the property is located. Your nonresident state will also tax the gain on the sale of property located there. You will claim a credit for taxes paid to another state on your resident state return to mitigate the double taxation.

Complete the CA nonresident return before the ID resident return and take note of the income taxed (should only be the gain on the home sale) and the tax liability. Those numbers will transfer to your ID resident return to calculate the credit. You will only need to verify the numbers in the ID return (steps below).

Edit your ID return
Click through to the page asking about the ID capital gains deduction
If the home sale is the only capital gains then answer "No" you do not have ID qualified capital gains.
If you have other capital gains click the "Learn more" link to find if those gains are ID qualified and answer the question as applicable
When you get to the ID home sale page enter zero (0) in the ID home sale box
Put in the CA address (at least state/zip)
Click through/verify/answer as necessary to arrive at the "State Tax Credit" page
Answer "Yes"
Verify numbers
You'll see the credit amount applied in the follow on page