No. How you used the proceeds from the sale of land is not important when entering the sale information.
When you partitioned off the land from your home, a portion of your total basis was allocated to the partitioned land. You may calculate the basis using a percentage based on total acreage. For example, if you had 3 acres and sold 1 acre, 1/3 or 33% of your adjusted basis (purchase price plus improvements) would be allocated to the land.
The sales price of the land would be the amount the buyer paid. This amount less your basis and selling expenses would equal your profit. If you owned the land more than a year, the profit would be considered Long-Term Capital Gain, which receives a lower tax rate than ordinary income.
This transaction may be reported as an Investment Sale, found under Wages & Income >> Investment Income >> Stocks, Mutual Funds, Bonds, Other.
The easiest way to find this section of TurboTax is to use the Search box at the top right side of the TurboTax header. Click on the magnifying glass, type in "investment sale", hit Enter, and click on "jump to investment sale" to go directly to beginning of this topic.
- Click Start/Update or "Add a Sale."
- Type of Investment: Land
- Enter a description, Net Proceeds (sales price less selling costs & commissions); date of sale.
- Acquired: whatever method fits
- Cost Basis: See below
- Date of Acquisition: purchase date
If you need assistance with the basis allocation, the realtor who handled the sale may be able to help you.
Note: This is not reported as the sale of your home, because you partitioned off the portion of land that was sold. However, you need to retain good records on this sale, as the basis in your home was reduced by the portion allocated to the land. This will be important when you sell your home in the future.