sale of primary residence

[captainfreedom]

My wife and I sold our primary residence (a condo) in October of 2023. We sold the condo for about $100,000 more than it was purchased for. My wife lived in the condo for 8 years before it's sale. According to Turbo Tax we owed capital gains tax on this. After doing some research this seems like it should have been exempt. What recourse do I have at this point?

[tagteam]

At least she is eligible.

See https://www.irs.gov/publications/p523#en_US_2023_publink10008938

If you meet the use test, you are also eligible.

[taxlady28]

I have sometimes found a bit of a bug in the software.  When you go through the questions about whether the property falls under exempt because it was a primary residence, sometimes I had to answer No to the question about living in it and then the software would give the correct exempt status.  I would suggest you go through your return and see what happens when you tell the software it was not a residence.

If you already filed, then amend the return and make sure it reflects the correct exemption.  If you have not filed, see if that makes it correct.  It has been like that for years.  It must have been a primary residence and lived in for at least two of the last five years before being sold.

[Mike9241]

the rules are 1) one of you (or both) must have owned the condo for 2 out of 5 years before sale. 2) one of you (or both) had to occupy it as your principal residence for 2 of the 5 years before the sale. The 2 out of 5 year periods do not have to be the same. if one of you meets both tests but not the other, then the exclusion drops to $250,0000 but that's still enough to eliminate $100,000 gain

however if there was a previous sale of your principal residence within 2 years of this sale it could affect the amount of the exclusion 

go back to the home sale worksheet. you did use that rather than entering sale on form 8949

[VolvoGirl]

Did you ever use part of it for business or home office and take depreciation?