Suppose I sell a stock for a capital gain this week in a state that taxes you on capital gains. But then I move to another state that has no capital gains tax, and live there for the rest of the year. Do I still have to pay the capital gains tax (because I was living in the tax state at the time of sale)?
There is some sort of six-month-plus-one-day rule to determine which state is your tax state. I would be living in the new state for 11 months and perhaps longer... so it's not like I would be pushing the limits on the shortest amount of time possible to live in the state. It's the timing of the sale of the stock that has me concerned.
I want to sell the stock before moving, but I would like to (legally) not have to pay the capital gains tax. I'm hoping I can sell the stock, move to the new state in February, and then not have to pay the tax.
I'm not sure if the timing of the sale of the stock matters. I almost think it would not matter. A person moving from a non-tax state to a tax state could theoretically sell a ton of stock on Jan 2, then move to the tax state for 363 days. Even though he/she sold the stock immediately prior to moving, the tax state would want to claim tax on the sale, since the person lived in the new tax state for 363 days,
Does anybody know what the rules are on this?
(P.S. this is a non-trivial amount of tax).
Sounds like a problem. What I would do is figure out when is the soonest that you can sell the tax and not get taxed. Then, if there are options available on the stock, collar the stock (sell an ATM call and use the proceeds to buy an ATM put). Buy the longest duration possible to protect against dividend-driven early assignment in case the stock keeps rallying higher. If the stock is not a hard-to-borrow stock, then you'll likely even have a small net premium on the options. The put will protect your downside while the call will limit any upside so you'll effectively lock in your gains until you can sell the stock later.