Deductions & credits

There used to be a provision for the sale of your personal home to be tax free if you put the money into your new home. However, this was replaced with the 250,000 dollar home sale exclusion if you lived in the home for 2 of the 5 years immediately prior to the sale. (There are section 1031 exchanges that still apply in regards to investment real estate property replaced with real estate property.)

See the following rules regarding qualifications for a home sale exclusion and steps for entering a qualifying home sale:

Ordinarily, you need to meet the following requirements to exclude the sale of a home:

• You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.
• You didn’t acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.
• You didn’t claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.

However, if you don’t qualify for the full exclusion, you may qualify for a reduced exclusion if one from any from a number of listed unforeseen occurred.

The reduced exclusion percentage is calculated by dividing the number of days that you lived in the home divided by the number of days in two years. That percentage is multiplied by the full exclusion amount of 250,000 dollars (or 500,000 dollars for married joint filers).

The listed unforeseen events are as follows:

Work-related move.   You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold:

• You took or were transferred to a new job in a work location at least 50 miles farther from home than your old work location.
• You had no previous work location and you began a new job at least 50 miles from home.
• Either of the above is true of your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence.

Health-related move.   You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold.

• You moved to obtain, provide, or facilitate diagnosis, cure, mitigation, or treatment of disease, illness, or injury for yourself or a family member.
• You moved to obtain or provide medical or personal care for a family member suffering from a disease, illness, or injury.
• Family includes:
• Parent, grandparent, stepmother, stepfather;
• Child, grandchild, stepchild, adopted child, eligible foster child;
• Brother, sister, stepbrother, stepsister, half-brother, half-sister;
• Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law;
• Uncle, aunt, nephew, niece, or cousin.
• A doctor recommended a change in residence for you because you were experiencing a health problem.
• The above is true of your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence.

Unforeseeable events.   You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold.

• Your home was destroyed or condemned.
• Your home suffered a casualty loss because of a natural or man-made disaster or an act of terrorism. (It doesn’t matter whether the loss is deductible on your tax return.)
• You, your spouse, a co-owner of the home, or anyone else for whom the home was his or her residence:

1. Died;
2. Became divorced or legally separated;
3. Gave birth to two or more children from the same pregnancy;
4. Became eligible for unemployment compensation;
5. Became unable, because of a change in employment status, to pay basic living expenses for the household (including expenses for food, clothing, housing, medication, transportation, taxes, court-ordered payments, and expenses reasonably necessary for making an income).

To enter the sale of your primary residence, follow this path in the program:

1. Go to the Federal Taxes category in your TurboTax file.
2. Go to the Wages and Income subcategory.
3. Find the section labeled "Less Common Income" in the "Your Income" list.
4. Click start or update on the item labeled "Sale of Home".
5. Answer yes, you did sell your home in 2016.
6. Indicate that you Sold a Home and hit continue.
7. Enter the address of your home.
8. Continue through the sales and purchase data entry screens, and continue.
9. On the screen labeled "Time You Lived In Your Home", click yes or no regarding the period of time that you lived in the home and hit continue.
10. On the screen labeled "Did You Use This Home for Anything Other Than Your Primary Home?" indicate whether there was period where you moved out of the home. If the answer is yes, the program will ask for the period of time in days.
11. On the screen labeled "Another Home Sale", indicate whether there was an excluded home sale within two years from the sale of your home.
12. On the screen labeled "Depreciation After May 6, 1997", indicate whether there was depreciation for business usage. If you answer yes, TurboTax will ask for the total depreciation taken since 5-6-1997.
13. The next screen will tell you that you qualify for the exclusion and that you don't need to report the sale. Hit continue.
14. The next screen should ask "Include Sale of Home in Return". Check the box at the bottom here, and the sale should be included on your return.