Go through the Home Sale section first to see if you qualify for a Partial or Full Exclusion on the home sale proceeds. Type 'home sale' in the Search area, then click on 'Jump to Home Sale'. If TurboTax asks why you moved, choose 'Health' as the reason (this is for a partial exclusion). If you qualify for the Full Exclusion, you won't even be asked.
If TT says you qualify for a Full Exclusion, make an adjusting entry in the 1099-Misc section with notation 'home sale exclusion' to offset the 1099-Misc income.
If TT says you qualify for a Partial Exclusion, enter that amount as an adjusting entry in the 1099-Misc section.
Save the documentation that proves the 1099-Misc income was for home sale proceeds.
Here's more info on the Home Sale Exclusion.
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