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We plan to put our house on the market during the first quarter, so the sizeable gain will occur in 2020, after we've moved. Both CA and VA have state income tax, which one gets any tax on the gain?

CA is very clingy about counting you as a resident until you actually rid yourself of all property in the state. That said, VA will probably claim you as a resident, too, since you will have actually moved there. So you will probably be a resident of both states (yes, that is possible) and may have to pay tax to both states. You will need to look at the website for each state's taxing authority, and figure out how they will interact.

If we take the standard deduction on our 2019 state and federal income tax, is it possible to carry over donations made in the last quarter of 2019 to offset 2020 state and federal income tax?

Well, the charitable contribution deduction carryover is only for when your charitable deductions exceed the allowable percentage of your income. If you're taking the standard deduction, how are you going to exceed the allowable percentage of your income?

AJ
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We plan to put our house on the market during the first quarter, so the sizeable gain will occur in 2020, after we've moved. Both CA and VA have state income tax, which one gets any tax on the gain?

CA is very clingy about counting you as a resident until you actually rid yourself of all property in the state. That said, VA will probably claim you as a resident, too, since you will have actually moved there. So you will probably be a resident of both states (yes, that is possible) and may have to pay tax to both states. You will need to look at the website for each state's taxing authority, and figure out how they will interact.

If we take the standard deduction on our 2019 state and federal income tax, is it possible to carry over donations made in the last quarter of 2019 to offset 2020 state and federal income tax?

Well, the charitable contribution deduction carryover is only for when your charitable deductions exceed the allowable percentage of your income. If you're taking the standard deduction, how are you going to exceed the allowable percentage of your income?

AJ
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California is going to tax the sale of your CA home whether you are a resident or not on the date of sale. If you say you are not a resident (which is at least possible given your brief description), CA requires the escrow company to withhold a portion of your sale proceeds for those CA taxes. You'll have a couple of options on how to calculate the withholding. So plan on doing a bit of tax planning around that.

California follows the Federal law on excluding a portion of the gain on the sale of your primary residence. So you will get that break.

If you are a VA resident at the time of sale (again, certainly a possibility), they will likely also want to tax that gain. Fortunately, one of the states will give you a credit for the taxes paid to the other. Typically, the resident state (VA in this case) will give you a credit for taxes paid to the non-resident state (CA) when both states tax the same income. But you'll need to find out exactly how this pair of states deals with the issue.

The practical way to get the deductions into 2020 is to wait until then to donate the property. As a strategy, perhaps you could clear a space somewhere in your home to store the items to be donated until after Jan 1. Or get the low value items donated now, and only store the higher value items until next year. In any case, you need to itemize deductions to benefit from the donations.

--Peter
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https://www.tax.virginia.gov/credit-for-taxes-paid-to-anothe...

To help prevent payment of taxes to multiple states on the same income, Virginia law provides a credit for taxes paid to another state. If any part of your Virginia taxable income is also taxed by another state, this credit may be available to you. To claim it, you will need to include the Schedule OSC and a copy of the return you filed with the other state with your Virginia income tax filing.



2020 will be a year where a professional tax person that is familiar with both California and Virginia state taxes would be worth their fees.
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If we take the standard deduction on our 2019 state and federal income tax, is it possible to carry over donations made in the last quarter of 2019 to offset 2020 state and federal income tax? Are there other pitfalls and opportunities I've not considered?

No carryover of donations when you claim the standard deduction.
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California is going to tax the sale of your CA home whether you are a resident or not on the date of sale. If you say you are not a resident (which is at least possible given your brief description), CA requires the escrow company to withhold a portion of your sale proceeds for those CA taxes. You'll have a couple of options on how to calculate the withholding. So plan on doing a bit of tax planning around that.

My wife died in January 2019. I sold our Thousand Oaks, CA home of 42 years in July 2019. I plan to use the Federal and California tax code provision to exempt $500K capital gains from the sale of a primary residence from taxation on my 2019 tax returns. The exemption is extremely important as California taxes capital gains as ordinary income.

My wife inherited stocks from her mother's estate shortly before she died. As the court-appointed administrator of her estate, I sold the stocks in preparation for distributing her estate to me and our three children. It appears that her estate will owe no Federal taxes; however, her estate will owe California taxes on the capital gains as they are treated as ordinary income.
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Been there, done that.

If your capital gain exceeds your $500K exemption, keep in mind you can still adjust your cost base with any expenditures you made for improvements to the property over the years. The IRS has a booklet on what can be counted as improvements. Replacing the old does not count but major renovations like redoing a bathroom or kitchen do. Even a new roof counts as a renovation.

Many have neglected those cost records now that many are covered by the exemption. People got good at it in the old days when keeping track of improvements was important.

Lawyers say you are a resident of wherever you say (or actually where ever you put the pillow on your bed). So pick the state with the best tax treatment for your situation. But be prepared to back up that decision with other decisions such as where you have your drivers license, vehicle licenses, voter registration etc.

Most states have their own rules on how to split income for partial year residents. Easiest is to give consideration to changing you place of residence on January 1.
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My wife died in January 2019. I sold our Thousand Oaks, CA home of 42 years in July 2019. I plan to use the Federal and California tax code provision to exempt $500K capital gains from the sale of a primary residence from taxation on my 2019 tax returns.

You probably don't need to worry about the exemption. Assuming you owned the home jointly with your wife before her passing, it is community property and got a full step up in basis at her passing. You would only need to pay tax on any gain between January and July of 2019. And it's pretty likely that if there was any gain, it will get eaten up in the commissions and other costs of sale. And even then, you'd still have the $500k exclusion available to you. So I'm going to stick my neck out and say you will have no income taxes on the sale of your home.

My wife inherited stocks from her mother's estate shortly before she died.

These would also get a step up in basis to the FMV as of the date of your wife's passing.

--Peter
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If your capital gain exceeds your $500K exemption, keep in mind you can still adjust your cost base with any expenditures you made for improvements to the property over the years.

The step up in basis at his wife's passing makes all of those old improvements irrelevant. The FMV of the house on the date of her passing becomes his new basis and would already include any older improvements.

Lawyers say you are a resident of wherever you say (or actually where ever you put the pillow on your bed).

Probably not tax lawyers. Each state is free to define residency for tax purposes as they see fit. You don't get to pick and choose any random date. I don't believe any have a good bright line test - it's all based on the facts and circumstances. The best you can do is to arrange your circumstances and facts to achieve the desired result.

So for the poster up thread who sold his house in July 2019, assuming he moved out of state on or around that date and acquired a new residence in the new state at about the same time, he's going to have changed his residency at that time.

--Peter
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Lawyers say you are a resident of wherever you say (or actually where ever you put the pillow on your bed).

I have been through this with the out of state student situation. This is what lawyers say. If your home state collects personal property taxes on your vehicle, do you pay?

The date of residency situation also arises if you commute between homes in two states. You can declare residency in either state on a date you choose, but the tests above apply.
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Lawyers say you are a resident of wherever you say (or actually where ever you put the pillow on your bed).

It doesn't matter what lawyers say, unless they are practicing law and pontificating specifically on the requirement for the state(s) and the purpose that are in question.

I have been through this with the out of state student situation. This is what lawyers say. If your home state collects personal property taxes on your vehicle, do you pay?

Depending on the states involved, there can be different residency requirements for being a resident for student purposes vs. being a resident for tax purposes. And again, pontification by the lawyers needs to be specific for the state(s), and for the purpose.

The date of residency situation also arises if you commute between homes in two states. You can declare residency in either state on a date you choose, but the tests above apply.

Different states have different requirements. It is possible to be a resident of 2 states at the same time, depending on each state's requirements. Again, the specifics for each state need to be researched for the specific purpose.

AJ
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