TurboTax is calculating your gain correctly. You get an exclusion of up to $500,000 for your personal residence. When you started taking the home office deduction, including depreciation expense, you converted that portion of your house to business property, and the gain on that portion is not eligible for the exclusion. You have already taken a tax deduction for the amount of depreciation you have taken. You don't get to then exclude gain on that amount as well. Moreover, that amount will be subject to depreciation recapture tax, which is 25%, rather than capital gain tax rates.
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