Get your taxes done using TurboTax

Yes, it can be confusing since the qualifying home for the exclusion was also a rental property.  I will try to explain how this works when there is a gain on the sale. Double check your entries and calculations to be confident all answers are correct.

When you enter the home sale in TurboTax it will ask for a couple of items that are needed to report the sale correctly.  

1. The total depreciation expense that was allowed during the period it was available for rent.  Check your prior tax returns for this figure.
2. The number of days the property was available for rent during the ownership period.

Results:

1. The amount of depreciation that was allowed will be completely taxable up to the amount of gain received on the sale.
2. The remaining gain if any, will be split between taxable and amount eligible for exclusion by using the following formula.
   • The total days available for rent will be divided by the total days owned to determine the portion of the remaining amount of gain that is taxable for the rental period
   • The balance will be eligible for the home sale exclusion
3. TurboTax will do all the calculations based on your entry.

Make sure you have indicated for each asset in the rental activity that it was taken out of service.

To enter Passive Activity Loss Carryovers from a Prior Year for your Rental Property in TurboTax Online/Mobile or TurboTax Desktop:

1. Search (upper right) > type rentals > Click the Jump to.. link
2. Click Start (or Revisit) next to Rental Properties and Royalties (Sch E)
3. Click Yes
4. Click Continue
5. Click the Edit button next to the rental you'd like to add info for
6. Click Continue until you reach the screen entitled Do any of these situations apply to this property?
7. Scroll to the bottom of this page and check the box next to I have passive activity real estate losses carried over from a prior year. 
8. Click Continue
9. You'll be able to input the carryover amounts on the next screen
10. In Property Info be sure to indicate it was sold and when prompted select Special Handling (this stops TurboTax from looking for sale information in the rental activity).