Since you have prior use of the home as your personal residence and you have rental activity you will pay tax on some of the gain even if you meet the exclusion. Depreciation expense must be recaptured, then some of the gain will be excluded.
- Do not enter under Sale of Home or Sale of Business Property, instead follow the instructions below.
If the home is currently set up as a rental on your return at the time of sale, then you need to complete the sale in the rental asset or assets.
You will select the home and each asset if there are others to indicate it was sold.
You need to dispose of the property by telling TurboTax how and when it was disposed of. Follow the instructions below.
- Click on Income & Expenses
- Under Your income and expenses, scroll down to
- Rental properties and royalties, click Edit/Add
- Do you want to review your rental?, click Yes
- Under Rent and Royalty Summary, click Edit
- Click Update to the right of Assets/Depreciation.
- Do you want to go directly to your asset summary?, click Yes and Continue
- Click Edit to the right of each asset to be disposed
- Go through several screens until you get to Tell Us More About This Rental Asset
- Click on This item was sold……. And continue to answer the questions
You might also review information here.
You will need to answer "No" to Special Handling to answer the questions about using it as a home On the next screen you will be asked 'Was this asset included in the sale of your main home?'. Select Yes and then follow the screens to finish the reporting of your sale.
TurboTax will allocate the proper taxable amount due to the depreciation from the gain on the sale, only gain that exceeds this will be eligible for the exclusion. You will not see 100% of the gain excluded, even if the total gain is below $500,000 for married taxpayers.
@tychivo
[Edited: 04/05/2022 | 10:03a PST]
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