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lorenzo2

Since you reside in MD, perhaps you can answer a MD tax question for me. Does MD let one exempt the gain on a personal residence using the same rules as the Feds? It would seem that they do since a MD tax return starts with the 1040 and the gain would not show up on the 1040 if it meets all the requirements - less than $500k for married, lived in 2 yrs out of last 5 yrs, etc.

t
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Does MD let one exempt the gain on a personal residence using the same rules as the Feds?

I assume so, and for just the reason you state. In doing Maryland taxes, you start with federal AGI, make some obvious additions and subtractions (e.g., interest on non-MD obligations), adjust deductions a bit (e.g., remove MD income taxes paid), arrive at net Maryland taxable income, then calculate state and local taxes. In particular, there is about a page worth of additions to income, none of which relates to the gain on selling a residence. So the only way it can get there is by flowing through from the federal return as a capital gain, which means federal capital gain rules apply.

Do other states do this differently? I see that you're in California, and I gather your tax people are a mite more creative. Say, are you running for governor? In that case, you must be putting together a taxpayer friendly tax code! Good luck, hope you beat the porn queen, at least!

Lorenzo
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