My primary residence is in NJ. I have a vacation home in NC which I plan to sell. I will have a capital gain of $145,000. I am told I have to pay the capital gains tax to NC since the property is located there. I am also told that I have to report the capital gain income on my NJ state income tax return. If this correct? It feels like double taxation to me.

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Originally Posted by Beemaa

It feels like double taxation to me.

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Exactly. Agreed!! But that is the tax law.

If you have to report the capital gains on your NJ tax, you will also claim credit for taxes paid to NC.

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Originally Posted by MukatA

If you have to report the capital gains on your NJ tax, you will also claim credit for taxes paid to NC.

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Right. The size of the credit that you take on your NJ tax return works out to be the lessor of (a) taxes actually paid to NC and (b) the amount of tax NJ would charge on that income.