If reported, it is reported for the tax return of the year of sale. However, it may not even be reported.
For the sale of a residence, up to $250,000 ($500,000 on a joint return where you both lived in the residence) of gain can be excluded from income if you lived in and owned the house for two of the last five years.
(You may have a smaller exclusion if the property was used as a rental during the five year period, and you may have income from recapture of depreciation if you claimed an office in the home deduction for the home.)
If you work through the interview on sale of a residence, Turbotax will compute the exclusion. Look under the wages and income tab for less common income, then sale of home.
I would only report the sale if:
The gain exceeds the amounts that are exempt from tax, or
You received a Form 1099-S from the closing agent.
A closing agent can get an affidavit or statement from you that the sale meets the requirements for exclusion and, if so, not send a Form 1099-S reporting the sale. If the gain is fully excludible and you don't get a Form 1099-S, there is no reason to report the sale on your tax return.
