Moving and State taxes
We plan to move in February 2025. We currently live in NC, which has a state income tax. We expect to have a capital gains tax-triggering event in April of 2025. We plan to move from NC three hours away to Tennessee (no state income tax) at the beginning of 2025, then in August of 2025 move to Colorado (state income tax). This is a way to avoid paying state capital gains tax to NC or CO, which seems to be an acceptable tax strategy. If we spend at least 183 days in TN, is that where we file state taxes?
Best Answer
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Hi AmySP,
Where you report the capital gain all depends on where the capital gain was generated. For example if it is the sale of an investment, like stocks, and you live in TN, then nothing is attributed to CO or NC. However, if it is an investment property located in NC, then the capital gain would all be reported on NC.
Does that answer your question?
Answers
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Hi AmySP,
It sounds like you will need to file two part-year resident returns in 2025, one for NC and one for CO.
Residents of Tennessee do not file a state income tax return regardless of how many days lived in the state.
If you move to Colorado during the year, you would be considered a part-year resident and file a part-year resident return. Scroll down through this state website for the rules on part-year residents:
Part-year residents
In general, a part-year Colorado resident is anyone who is either:
- domiciled in Colorado at the beginning of the tax year, but then abandons their Colorado domicile during the tax year; or
- domiciled outside of Colorado at the beginning of the tax year, but then moves to Colorado during the tax year and establishes domicile in the state.
At any given time, a person has only one domicile. A part-year resident is a Colorado resident for that part of the year during which they are domiciled in Colorado and a non-resident for that part of the year during which they are domiciled outside of Colorado.
All of the income realized by a taxpayer when they are domiciled in Colorado is subject to Colorado taxation. Additionally, any income they realize while they are not domiciled in Colorado is subject to Colorado taxation if it is derived from Colorado sources. For additional information, please see Department publication Income Tax Topics: Part-Year Residents & Nonresidents, available online at Tax.Colorado.gov/individual-income-tax-guidance-publications(opens in new window).
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So if I spend one month in NC, then 4 in Colorado, I would not owe state capital gains tax, because the majority of my year was in TN, correct?
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Thanks for the answers!
