I purchased and sold a house within five months due to the loss of a job, the profit was less than $50k, what are the rules regarding Capital Gains Tax in this situation?

 
KarenJ
Intuit Alumni

Deductions & credits

If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement.  You can exclude up to $250,000 gain if single or $500,000 gain if married.

You should be able to take a percentage of the home income exclusion if you consider your loss of income to be an unforeseen event.

If you did not use the home as your primary residence for 2 of the last 5 years and meet the home gain exclusion requirements, you may still be eligible for partial exclusion if you can show the main reason you sold your home was because of a change in workplace location, for health reasons, or because of an unforeseeable event.

Unforeseen circumstances are defined by Treas. Reg. § 1.121-3(e)(1) as events the taxpayer could not reasonably have anticipated before purchasing and occupying the residence. Specific-event safe harbors are provided in Treas. Reg. § 1.121-3(e)(2): involuntary conversion of the residence; disasters or acts of war or terrorism damaging the residence; or a qualified individual’s death, health, unemployment (if eligible for unemployment compensation), change in employment status that results in an inability to pay housing costs and basic living expenses, divorce or legal separation  under a decree of divorce or separate maintenance, or a multiple birth See this IRS link for more information on the exclusion:

https://www.irs.gov/publications/p523/ar02.html#en_US_2015_publink100011875

To enter the sale of your home in TurboTax Online or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
  3. Next click on “I’ll choose what I work on” (jump to full list)
  4. Scroll down the screen until to come to the section “Less Common Income”
  5. Choose “Sale of Home (gain or loss)” and select “start’
  1. You will eventually come to a screen "Reason for Sale" - you should select "Change in employment leaving you unable to pay mortgage or basic living expenses"



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