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MN has what's called a safe Harbor Rule
Here's how it works:
Generally, you must make estimated tax payments if both of the following apply:
This is known as the “safe harbor rule”: If you pay at least one of these amounts in Minnesota income tax during the year, you won’t be charged interest on any tax you still owe as of Dec. 31. If your withholding and credits total less than either of the “safe harbor” amounts, you need to make estimated tax payments to cover the difference and avoid interest charges.
Then, as it applies to non-residents:
Part-year residents or nonresidents: The “safe harbor” rule applies as long as your Minnesota tax liability was at least $1 in the previous year. Your adjusted gross income that’s assignable to Minnesota is used to determine if you meet or exceed the $150,000 threshold.
You'll have to pull together your 2012 numbers
aorry ... and see where that puts you
our income in MN has been negative for the last 5 years. Is the net monies from the sale of the property income or not? That is where I am confused
Yes, capital gains plus sme passive income
Do you know that the MN cap gains rate is 15% or were you talking about Federaql?
Federal is 15%
someone said we pay state tax in MN rather than MN capital gains
but we are trying to figure it out so we know how much of the proceeds to set aside and whether we need to send some to MN now
OK, actuaqllym there is a bill pending right now that will change that ... hand on just a sec ,,, just found it
Effective for tax years beginning after December 31, 2012EXPLANATION OF THE BILLCurrent Law: For the Minnesota individual income tax, capital gains are treated the same as otherincome; no exclusion or lower rate applies.Proposed Law: The bill would allow a subtraction from taxable income equal to a 30% of the adjustednet capital gain, as defined, to the extent that it is included in federal taxable income. For farm assets,the percentage is equal to 60% of adjusted net capital gain. Farm assets are defined as livestock, farmequipment, farm real property, and farm depreciable property. The subtraction would also apply incomputing alternative minimum taxable income for purposes of the alternative minimum tax.
The "income" on the rental property has always been negative and we lose about $5000 per year - just sold it at a $45,000 capital loss but sold another MN property at $195000 capital gain
SO this really is up in the air at this point.... I think the bill is in committee right now ... If it DOES NOT pass, then you are correct it
' is regular state income tax
if it does pass, what is our liability and when is it due?
OIC I thought the 5000 was a positive number ... I see now
Looks like it could be quite a break
And haven't lived in MN for over 5 years - so we are confused
right now, if nothing changes you will pay regular income tax on the net gain ... and will probably (ill have to look) get a credit on your Oregon Tax for any tax paid to another state
OK, go ahead and look and I'll lurk around my computer doing other things
Here are the rates as they are now in MN
So you'd be looking at 7.05%
And yes this is from Oregon Revenue
[Addition Code 104]
If you pay tax to Oregon and another state on the same item(s) of income, you have "mutually taxed income." You may be able to claim a credit on your Oregon return for income taxes paid to another state.
How does OR tax the gain?
so 7.05% on 140,960 of the gain and 7.85 on the residual $5000 or so since it is $150,000 net sale profit minus ~ 5,000 rental income loss
If it stays as it is nos ... it's all income so 145000
as it is "now"
See this, from the Oregonian
Yet Oregon's tax structure, which taxes capital gains at the standard income rate, is famously unfriendly to investors and small business owners alike. For long-term capital gains, Oregon's top combined federal and state rate, 21.4 percent, is higher than every other state's except California's (21.7 percent) and Hawaii's (22.2 percent), according to a March study by the American Council for Capital Formation, a Washington, D.C.-based organization that advocates for low taxes on capital gains.
Yes, just found it ..There is no special capital gains tax rate for Oregon, it's added to income
So what do you think is worst case scenario for total taxes due - and NO I won't hold you to it because things change, but just trying to figure out who to pay what and when ; )
K ... let me check one more thing to be sure that as residents that tax all income (and that is likely) IF they do, it'll be added to your other oregon income ... then you'll have a credit of the 7.05% of 145000 let me verify ....
Yes, if you are a full year resident and you included gain from a sale on your federal tax return it carries over to the Oregon form you are filing. That gain is then
included in your Oregon income and taxed at the rate your other income is taxed at for Oregon purposes. Again no special capital gains tax rate for Oregon.
Please don't shoot the messenger here ....
BUT then you will pay that 7.05% on the gain tp MN and that will be a credit against oregon taxes.... net net you'll pay at the higher of the two
so whatever adding the 145000 to your oregon takes you to (in terms of marginal tax rates) that's what you're really pauing, because you'll get everything you paid to MN back
sorry ... it hurts to make money doesn't it?
so 9% I think is the top tax category for OR
there ya go
so by brin a resident there you'll pay that additiona 1.95%
truly Laughing out loud
you're the first this year!
seemed fitting - glad it gave you a chuckle ; )
Do I need to send MN the 7.05% for Q4 estimated tax?
to add insult to injury ...
you dont qualify for the safe harbor, so technically you're supposed to .. Don't know what their underpayment penalty is
OK, any idea where I download the form and ship them their money?
MN dept of revenue I assume
Here's one thing you'll need:Underpayment of Estimated Income Tax
To pay your estimated tax electronically, log in to e-Services.
Woops hang on that las one the efile one was for corporate estimated disregard
the underpayment worksheek applies though
Here we go: http://www.revenue.state.mn.us/individuals/individ_income/Pages/Electronic_Payment_Options_for_Individuals.aspx
And by check (estimated form is third one down I think): http://www.revenue.state.mn.us/individuals/individ_income/Pages/How_to_Pay_Minnesota_Income_Tax_with_a_Check.aspx
And here's the information about filing the non-resident return itself
How Nonresident Income Is Taxed by Minnesota Nonresidents (Income Tax Fact Sheet 3)
Sorry, thought the links would transfer ... just another moment
Here we go ... you'll see about halfway down the table here...
Do you want the form itself Turbotax would be a very good way to do this ... just do the federal, then do MN and then oregon last (that will ensure you get the credit)
OK, yeah we always do TurboTax - do you think I need the help of one of their CPAs or just go on when it is available at the end of Jan?
I think given that you have your arms around it conceptually you should be able to handle it ... (maybe asl for help it somethings not working as you think it should) I'd just use the interview method... so it asks you all the questions ... You'll do Federal First, the add MN everything will flow to there ... go through the questions it will ask about MN ... then add Oregon ... by doing the resident state last ... you'll get the credit for the tax paid to MN
OK, sounds good. It is a little confusing since the capital loss is on a property that was used as a rental and would therefore be considered a business? But I will ship MN 7.05 of the $145,000 we estimate gain and then see if turbotax can handle the rest
but then again, nobody ever claimed the tax codes were simple ; )
well, maybe somebody did - but they lied
on the cap gain in MN
a rental isn't considered a trade or business ther'll be a schedule e but they consider that simpl rental income
no sales tax in OR, so the income tax is where they'll GET US
ahhh, SOME relief
yes, there is apparently some pressure to change as you sw from the article
to a lower cap gains tax
OK, good enough. I will set aside 15% fed cap gain and anticipate 9% OR tax and if they somehow make it more, I will just have to make payments ; (
Well, hopefully having all the facts'll help you "see around some corners"
Don't spend that NET money all in one place!
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I already spent the majority of the NET paying off the house in OR - Dave Ramsey Baby Step 6 - but had set aside $37,500 for taxes which sounds close
Ramsey's good ... no-nonsence
Thanks for all the help, absolutely you get an excellent rating
...senSe You're very welcome
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