Which state to file Capital Gains tax to??

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Which state to file Capital Gains tax to??

Postby Trex » Tue Apr 10, 2012 12:01 am

Hi,

I live in MA and work in RI. This past year I sold a gold coin in RI and it is taxed as a collectible (28%) under the long-term capital gains reporting for my federal return. My question is, since I bought the collectible in RI years ago and also sold it in RI, should this only be reported on my RI tax return, and not on my MA tax return?

MA instructions say to report any income from long-term capital gains which are reportable to MA. But it doesn't specify what that means. Doesn't seem like I should have to pay taxes on it in multiple states. Any advice?

Or, do I report it in RI and calculate how much I owe RI, and then also report it in MA... but then the RI is technically subtracted from what I owe MA, so I might have some left over to pay. SImilar to how the rest of the state taxes work?

I'm assuming this question would be applicable for any 2 states.

Thanks,
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Re: Which state to file Capital Gains tax to??

Postby xerty24 » Tue Apr 10, 2012 12:16 am

Capital gains go to your home state. Follow the nonresident instructions for the other state for what, if anything, you report to them for capital gains.
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Re: Which state to file Capital Gains tax to??

Postby Trex » Tue Apr 10, 2012 3:26 pm

Thanks,

It sounds like I need to report them to MA and also RI (they treat capital gains the same as federal). Whatever I pay to RI I get to subtract from my MA taxes due anyways so I should not be double taxed.

Just trying to double check to see if others have the same question.
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Re: Which state to file Capital Gains tax to??

Postby Bongleur » Fri Apr 27, 2012 12:59 am

1) how does RI have a record of the sale in the first place?

2) How can RI tax you for Capital Gains when you are not a resident? Capital Gains are reported on the state tax form, right? -- how can a non-resident be required to file one in the first place? I don't see how a state has the authority to tax a non-resident, unless the tax was collected by the merchant.
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Re: Which state to file Capital Gains tax to??

Postby sscritic » Fri Apr 27, 2012 1:22 am

Bongleur wrote:2) how can a non-resident [of RI] be required to file one in the first place? I don't see how a state has the authority to tax a non-resident

I live in MA and work in RI.

He works in RI. Why would you think a state where you work but don't live can't tax you? The term is "source income." If the source is RI, RI is going to tax it. If the source is NY, NY is going to tax it. If the source is CA, CA is going to tax it. The only states I know of that won't tax source income are states that don't have an income tax.

For example, here is what NY says about NY source income of non-residents:
If you are a nonresident individual, estate, or trust, or a part-year resident individual or trust, you are subject to tax on your New York source income.
http://www.tax.ny.gov/pubs_and_bulls/tg ... sident.htm
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Re: Which state to file Capital Gains tax to??

Postby Bongleur » Fri Apr 27, 2012 4:07 am

I worked in PA and lived elsewhere. Didn't owe PA a dime. Would have rather paid PA, my residence state charged more.
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Re: Which state to file Capital Gains tax to??

Postby dbltrbl » Fri Apr 27, 2012 6:47 am

Some states have reciprocity. I live in KY but work in Ohio. Never filed anything for Ohio except first year which said I live in KY. If that's the case you do only MA.
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Re: Which state to file Capital Gains tax to??

Postby sscritic » Fri Apr 27, 2012 7:17 am

Ah yes, reciprocity. In that case, the theory would be that the you owe the state a return and a tax, but because of a side agreement based on the numbers of people who cross borders to go to work, the state waives its right. Here is what PA says:
Nonresidents of Pennsylvania. PA law taxes the income you earn, receive and realize from PA sources.

but
Reciprocal Compensation Agreement States
Pennsylvania has agreements with Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia. Generally, under these agreements, one state will not tax a resident of the other state on compensation that is subject to employer withholding.

If you are a resident of a reciprocal state working in Pennsylvania and your employer withheld PA income tax, you may request a refund of the PA tax. You report zero taxable compensation on Line 1a, and the PA tax withheld on Line 13.

If you live in NY and work in PA, you pay. It is also true that
Nonresidents do not pay PA income tax on gains realized on the sale, exchange or disposition of intangible personal property, such as stocks and bonds, nor may nonresidents use the loss from such sales against other taxable gains.


To the OP: I believe that you follow the instructions. What do the MA instructions say? I know you quote the word "reportable," but if you forget where you bought the coin and where you sold it, would you report it on your return? Do the instructions exclude items bought and sold in other states? I doubt that MA excludes those sales. You buy and sell shares at Vanguard in PA but you still pay MA tax on your capital gains, don't you?
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Re: Which state to file Capital Gains tax to??

Postby Trex » Fri Jun 01, 2012 10:20 am

sscritic wrote:To the OP: I believe that you follow the instructions. What do the MA instructions say? I know you quote the word "reportable," but if you forget where you bought the coin and where you sold it, would you report it on your return? Do the instructions exclude items bought and sold in other states? I doubt that MA excludes those sales. You buy and sell shares at Vanguard in PA but you still pay MA tax on your capital gains, don't you?


Yes, I bought and sold the coin in RI, so I ended up reporting it on both RI and and MA. But again, I wasn't double taxed because I subtract anything I pay to RI from what I owe to MA.

Bongleur wrote:1) how does RI have a record of the sale in the first place?


And no, I have no clue if RI has a record of the transaction or not, but it's the right thing to do! :mrgreen:
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Re: Which state to file Capital Gains tax to??

Postby Sidney » Fri Jun 01, 2012 10:31 am

Bongleur wrote:1) how does RI have a record of the sale in the first place?


If it is a taxable event in the state, it doesn't matter if they have a record of it. Unless one is a proponent of tax evasion, it needs to be reported.

Bongleur wrote:2) How can RI tax you for Capital Gains when you are not a resident? Capital Gains are reported on the state tax form, right? -- how can a non-resident be required to file one in the first place? I don't see how a state has the authority to tax a non-resident, unless the tax was collected by the merchant.


Many states tax non-residents on income sourced in that state. For example, if you own rental property in the state and collect rents, you are likely subject to income tax in the state where the property is located whether you are a resident or not.
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