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Lets says I made $10,000 net personal investment gain on stocks if I sell now. This is Long term gain.

Lets say US federal tax rate is 20% on capital gain.

But I have $4,000 carry over investment losses (from stocks) from losses of previous years (on my schedule D).

The tax person told me the federal will first remove the $4,000 carry over losses I have on schedule D first, and pay taxes on what is left. So I only have to pay 20% capital gain taxes on $6,000 and not on $10,000.

This is all fine and clear to me.

Now my question is on state capital gain tax. does it work the same way?

Let say the state have 10% tax on capital gain.

Do I pay the 10% on the $10,000 or on the $6,000 after the federal have removed the carry over losses?

This is what is not clear to me and the tax person was not clear when I asked them.

I am assuming I have to pay state capital gain on the $6,000 and not on the original $10,000 but not able to find any confirmation on this.

I have no other income. Retired. So only income will be the selling of the stock. My state has high capital gain tax rate, so important for me to know which amount I will be taxed on. The one before carry over losses are removed from or the amount after (as with the federal taxes case).

ps. The state is Minnesota. I assumed all states have same rules.

Steve H
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1 Answers1

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You're asking about Minnesota capital gains tax.

Minnesota conforms to the Federal tax regime when it comes to capital loss carry-over, and doesn't have preferential capital gains tax (i.e.: it doesn't matter, for the purposes of the state tax, if the gain is long term or short term).

So yes, you'll be able to carry forward your prior year losses and deduct them from the current year gains.

See this fact sheet for details.

littleadv
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