Investors & landlords

[edited] Yes, you can take the gain exclusion as long as you considered the home your "primary residence" for 2 of the last 5 years.  You could live in it for two years and then rent it for three years and then sell it (so long as it is sold within the five year mark from when you first lived in it as your primary residence).

See this IRS link for more information on the exclusion:

https://www.irs.gov/taxtopics/tc701.html

If you rented the home before selling, then enter your home sale under the rental section. Select "Yes" to Home Sale under the Sale of Assets section under Rental Summary Screen. 

To enter this transaction in TurboTax, log into your tax return and type "rental (schedule e)" in the search bar then select "jump to rental (schedule e)", TurboTax will guide you in entering this information

Alternatively, To enter this transaction in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Business" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Business Income and Expense" 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 “Rental Properties and Royalties”
5. Choose “Rental Properties and Royalties” and select “start’ (or “update” is you have already worked on this section)
6. If your rental property is listed, you will need to select "edit" to access this information. Otherwise enter your rental property information. (If you are entering your rental information for the first time, you will need to add the rental house as an asset under step 16)
7. Is This a Rental Property or Royalty? - choose rental a put rental information and address
8. What Type of Rental is This? - choose rental type (ie: Single family (home or unit where a single family lives))
9. Do Any of These Situations Apply to This Property? - select sold (screenshot #1)
10. Was This Property Rented for All of 2015? - answer questions based on your circumstances
11. Property Ownership - select your ownership percentage
12. Indicate if you Actively Participate - yes or no (If yes, this allows some of the passive losses to be used against passive income)
13. Did You Pay Anyone $600 or More for Work Related to This Property? - yes or no
14. Is Your Property in Any of These Designated Areas? - Usually "none of the above"
15. Review Your Rental Property Rental Summary (screenshot #2)
16. Select Sale of Property/ Depreciation section. Here is some additional information you will need to select under the sale of property section: 

• About 3 screens in, if the house is listed under this section, you will select that you want to edit this property
• About 4 screens more, check box that you sold the property under "Tell us about this rental asset" (screenshot #3)
• For the special handling screen - say "no"
• Home Sale - select "yes" if sale of main home.
• Sales Information - enter the sales price information (screenshot #4) You will need to allocate the net sales proceeds into asset sale and land sale. If your proceeds are not allocated, you can use the same percentage of asset and land from the original purchase to the sales proceeds

If you did not rent your home during the tax year, you will need to enter this sale under the Sale of Home section.

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’

Say "yes" that you sold your main home and TurboTax will guide you on entering this information.  You will need:

• The date you sold your home and the selling price (from your closing statement)
• The date you bought your home and the purchase price (from your closing statement)
• The cost of any major improvements you made, so we can deduct them for you
• Form 1099-C if you sold your home at a loss (short sale)

Just remember to check the box to have your home sale reported on your tax return but ONLY if you receive a 1099-S (screenshot #5) 

Sale of rental house if conversion of a primary residence to a rental : In order to calculate the capital gain or loss when you sell a residence that had been converted to rental property, you need to know three things:

• Your adjusted tax basis in the property (both at the time of the conversion and the time of the sale)
• The sale price
• The fair market value of the property when it was converted to rental property

If the converted property is later sold at a gain, the basis for purposes of determining the capital gain is your adjusted tax basis in the property at the time of the sale. If the sale results in a loss, however, the basis used is the lower of the property's adjusted tax basis at the time of the conversion or the fair market value when the property was converted from personal use to rental property. This loss rule ensures that any deflation in value occurring while the property was held as a principal residence does not later become deductible upon your sale of the rental property; a loss on the sale of a principal residence is not deductible. As usual, you calculate your capital gain by subtracting your adjusted basis from the sale price of the property