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Returning Member

Capital gains on home sale?

Hi ~

We are moving to a town 70+ miles away for a new job in town B.  In order to keep the for sale home that we loved in town B, we are purchasing it while still selling our current home in town A.  The town A real estate market is going well and we do not foresee having it listed for long.  We have been in our current town A home 8 months.  Will we have to pay a capital gains tax on our town A home when it sells?  It is likely to sell close to the purchase price that we bought it for. 

 

I saw that moving due to a job is a help to this issue.  We have also made improvements and will be closer to a health facility that is useful for our family.

 

I always file our taxes myself using self-employed and am worried about recording this correctly and also putting us under water with the capital gains issue we didn't know about before!

 

Any help would be appreciated!  Thank you!  😁

 

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Here is some info I found...  I wasn't sure what partial eligibility meant in this case and how to record all of that.

 

https://www.nerdwallet.com/blog/taxes/selling-home-capital-gains-tax/

 

  • See whether you qualify for an exception. If you have a taxable gain on the sale of your home, you might still be able to exclude some of it if you sold the house because of work, health or “an unforeseeable event,” according to the IRS. Check IRS Publication 523for details.
  • Keep the receipts for your home improvements. “The cost basis of your home not only includes what you paid to purchase it, but all of the improvements you’ve made over the years,” says Steven Weil, an enrolled agent and president at RMS Accounting in Fort Lauderdale, Florida. When your cost basis is higher, your exposure to the capital gains tax is lower. Remodels, expansions, new windows, landscaping, fences, new driveways, air conditioning installs — they’re all examples of things that can cut your capital gains tax, he says.

Does Your Home Qualify for a Partial Exclusion of Gain?

If you don't meet the Eligibility Test, you may still qualify for a partial exclusion of gain. You can meet the requirements for a partial exclusion if the main reason for your home sale was a change in workplace location, a health issue, or an unforeseeable event.

 

Work-Related Move

You meet the requirements for a partial exclusion if any of the following events occurred during your time of ownership and residence in the home.

  • You took or were transferred to a new job in a work location at least 50 miles farther from the home than your old work location. For example, your old work location was 15 miles from the home and your new work location is 65 miles from the home.
  • You had no previous work location and you began a new job at least 50 miles from the 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 requirements for a partial exclusion if any of the following health-related events occurred during your time of ownership and residence in the home.

  • 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 your:
    1. Parent, grandparent, stepmother, stepfather;
    2. Child (including adopted child, eligible foster child, and stepchild), grandchild;
    3. Brother, sister, stepbrother, stepsister, half-brother, half-sister;
    4. Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law;
    5. Uncle, aunt, nephew, or niece.
  • 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.

 

https://www.irs.gov/publications/p523#en_US_2016_publink10009003

12 Replies
Highlighted
Level 15

Capital gains on home sale?

If you sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

If you had a gain greater then the exclusion amounts then you would have to report the sale. Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported.

 

Capital Gain or Loss = Sales Price (-) Sales Expenses (-) Adjusted Basis (Purchase price plus the cost of improvement prior to the sale)

 

See IRS Publication 523 Selling Your Home - https://www.irs.gov/pub/irs-pdf/p523.pdf

Highlighted
Returning Member

Capital gains on home sale?

Thank you for the answer.  As I said, we lived in the current home only 8 months... that is part of my problem🤔

Highlighted
Returning Member

Capital gains on home sale?

If we are not making near that much - maybe $15,000 in the greatest of circumstances - but lived in the house 8 months, we need to be taxed on that amount?  Even if moving due to a job change 70 miles away?

Highlighted
Returning Member

Capital gains on home sale?

That publication is super useful, thanks!!

Highlighted
Level 15

Capital gains on home sale?

Then you would be eligible for the partial exclusion due to a work move -

 

IRS Publication 523 page 6 - https://www.irs.gov/pub/irs-pdf/p523.pdf#page=6

 

You took or were transferred to a new job in a work location at least 50 miles farther from the home than your old work location. For example, your old work location was 15 miles from the home and your new work location is 65 miles from the home

 

Use the worksheet on page 7 of Publication 523 for partial exclusion

Highlighted
Level 15

Capital gains on home sale?


@jessica12345 wrote:

Thank you for the answer.  As I said, we lived in the current home only 8 months... that is part of my problem🤔


Then if you qualify for the partial exclusion, you will be able to exclude approximately 1/3 (one-third) of the full Section 121 exclusion amount - 8/24 = .333 - so one-third of the full $500,000 exclusion if you are filing married filing jointly.

Highlighted
Returning Member

Capital gains on home sale?

We actually qualified for tax exclusion for the sale of our home last year because we lived there for 2+ years. TurboTax said we did NOT though so we owed a TON of money last year. I didn't question it, because I've been a long time customer of TurboTax. Looking at it again, we got totally screwed and I need to amend it now.  While trying to amend it, I get the same issue though! TurboTax says "NO EXCLUSION".

 

Why is this? My husband and I both lived there for the same amount of time (from end of 2010-beginning of 2018) and did not use the property for anything but our primary residence the entire time. We did not continue to live there or use it after the sale either.

 

What responsibility does TurboTax hold in a situation like this where there is a clearly an error on the software? How do we fix this? BTW, I also paid the upgrade to have a CPA review it last year and they didn't catch it either!

Highlighted
Level 15

Capital gains on home sale?

@karrotcurl Are you absolutely certain that you answered the questions accurately? One small oversight can essentially knock out the exclusion. For example, the question about whether you sold another main home before you sold you current main home.

Highlighted
Returning Member

Capital gains on home sale?

Yes, I am absolutely certain. I have done it repeatedly.  Try it yourself. The software is broken.

Highlighted
Level 15

Capital gains on home sale?


@karrotcurl wrote:

Yes, I am absolutely certain. I have done it repeatedly.  Try it yourself. The software is broken.


I have asked one of the TurboTax Moderators to contact you concerning this issue.

Highlighted
Level 15

Capital gains on home sale?


@karrotcurl wrote:

Yes, I am absolutely certain. I have done it repeatedly.  Try it yourself. The software is broken.


I have tried it, @karrotcurl, numerous times on test returns and it simply works for me (i.e., gain is excluded).

 

If you are having issues with this component of the program, you should contact Support (link below) since they can walk you through the process and determine exactly what is happening with your input and the software.

 

https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632

Highlighted
Returning Member

Capital gains on home sale?

So glad it "simply works" for you. It's not the case for my online version or the offline download customer service instructed me to use to "fix" it. 

 

Just so you know, (and others don't go through this), I reached out to customer service and got the run around. I was transferred back and forth to different departments, put on hold and then disconnected, and told to do things that ultimately didn't work or didn't apply to the situation. I spent a total of 3 hours over 2 days and 4 different reps to get nowhere. Even when they provided a link to file a claim under the "100% accuracy guarantee", there is absolutely no way to file my sort of claim when you've overpaid, especially if there is no IRS letter. It actually won't go any further without having an IRS letter and says it's not covered under the guarantee.  Obviously I haven't received a letter because a) this was for last year's return and it can take years for this to happen, and b) we paid thousands of dollar more than we needed to so the IRS is HAPPY. I'm not waiting up to 3 years to hopefully get a letter from the IRS telling me they owe me for overpaying.

 

I finally went to H&R Block to get my return amended because after days spent on Turbo Tax online and the downloadable program (which customer service told me to use because of the problem) both failed to catch the mistake. It was only when I went into the actual form and found the line item, that I saw TT's system checked the wrong box which was causing the error. Luckily I'm tax savvy enough to be able to get into the forms, but even after changing it, TT wouldn't keep the change. It's a total joke and TurboTax should be found negligent for what they've done to my family and their fake "100% accuracy guarantee".