I sold my primary home in 2019, had lived there since 1986. I made a capital gain on it that exceeded $250K. does this disqualify me from getting the exemption?

[octoman]

I lived in the home until 10/18, then moved into a new home.  never used this home for business purposes.

[NCperson]

you must have lived in the house for ANY 24 months of the last 60 months (5 years).  from your statement you satisfy this condition, so the first $250,000 of gain is tax free. 

[GiseleD]

Not necessarily. You may qualify for a reduced exclusion for the amount that exceeded $250K. Additionally, if your filing status was Married Filing Jointly, you and your spouse can each possibly qualify for a $250K exclusion, for a combined exclusion of $500K. 

Here is some information on this exclusion: 

Exclusion of Gain: Principal residence 

A principal residence is the taxpayer’s main home, which is the home where he or she ordinarily lives most of the time. A taxpayer can only have one main home at any one time.

Individual homeowners

Individuals can exclude up to $250,000 of gain on the sale of a home if three provisions are satisfied.

1) The individual owned the home for at least two years during the 5-year period ending on the date of sale,

2) The individual used the home as a principal residence for at least two years during the 5-year period ending on the date of sale, and

3) Previous gain exclusion. The individual did not exclude gain from the sale of another home during the 2-year period ending on the date of sale.

Married couples can exclude up to $500,000 of gain on the sale of a home if:

1) The married couple files a joint return for the year,

2) Either spouse (or both spouses) owned the home for at least two years during the 5-year period ending on the date of sale,

3) Both spouses used the home as a principal residence for at least two years during the 5-year period ending on the date of sale, and

4) Neither spouse excluded gain from the sale of another home during the 2-year period ending on the date of sale.

If either spouse does not meet all the requirements, the couple can exclude the total of the exclusions that each spouse would qualify for if not married and the amounts were computed separately. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property.

See IRC Section 121 for further information. 

@octoman

[octoman]

Giselle, thanks for the reply. However, Gisele, I met all the qualifications for the full exclusion although my capital gain was over $250K so I expected a limited exposure to the capital gains tax. However, the software indicated I had no exclusion. I cannot understand this.  It seems there may be a bug in the software.  I reviewed the questions several times.

[octoman]

I lived in it for 52 of the last 60 months and it was my primary residence for all of those 52 months.  Thanks for your reply, as any oversight on my part is worth pointing out.

[NCperson]

can you please post the questions and your answers? maybe we can all help you through this......

[octoman]

Ok.  Hope I'm not too verbose.

gave the sales price of the home, address, date sold [6/21/19], and expenses involved in the sale.  Indicated I'd received a 1099-S where I obtained the figures;

gave the date I bought the home [10/27/86] and the adjusted cost basis;

I was asked if I'd lived in the home 24 months out of the last 5 years [since 6/21/2014] and I answered "yes";

"Did You Use This Home for Anything Other Than Your Primary Home?"  to this question, I answered "No" and clicked on the continue box;

I was asked if I'd sold a home after June 21, 2017, which was two years before the sale of this house.  I answered "No";

I was asked if I'd rented out the part or all of the home or had taken a home office deduction after May 6, 1997 and I answered "No";

I answered "No" to a question about a spouse having died after 6/21/2017, two years before the sale of the home;

I was then informed that I was entitled to "no exclusion".  It's driving me nuts, but I hope this gets someone's attention.  thanks for asking and please point out any incorrect answers I may have made.  I need more eyes on this than just my own.

[NCperson]

I punched in the your numbers in the desktop version and did it for both a joint return and a single return.

In both cases it worked correctly and provided the correction exclusions.  ( I entered a $750,000 gain to see if only part of the gain was taxable and in both cases that is exactly what occurred).  

One thing I did notice,  though.  That question about living in the home for 24 of the last 60 months... At least in the desktop version, the "NO" response is to the right; normally in TT the "usual" response is the the right button and the 'unusual' response is the left button.  In this case it was designed the other way around. Any chance you hit the "no" button when you meant to hit the 'yes' button? 

Can you look again at which button you hit slowly and carefully? can anyone else look over your shoulder and review?  

The other odd thing is no one else is 'complaining' on these boards about a similar issue with this functionality. 

let us know what you find out! 

[octoman]

first, thanks for following this up in such detailed fashion and getting back to me.

I got the issue resolved.  I took a break and then decided to get on my laptop [I had used my desktop previously, but I have no idea if that made a difference] before I went to sleep.  I deleted everything and decided to reenter the data, as I had the numbers.  Voila!  this time it worked correctly.  I noticed the refund/owed numbers changed drastically after I answered the final conditional question that was needed. 

On my screen, the buttons you referred to were stacked as small buttons, one on top of the other.  When I was done with that question, I was asked to hit the "continue" button, which I did.  I had answered "no" to it.  that's one of the reasons I was going nuts, as I thought I had answered all the questions correctly.  Interestingly, though the results of this exercise indicated I was entitled to the entire capital gains exclusion, when the comparison sheet for last year and this year appeared after I had finished, it showed the entire capital gain from the sale of the house for 2019, not the taxable part of that gain.  Hopefully, this is not something to be concerned about, but it makes me worry a little.  Does turbotax keep this data for future use?  As I progress in filling in the data, I'll see if any other problems arise.

again, thanks for your help.

[NCperson]

the gain is defined as:

1) Sales price less selling costs

2) Cost basis plus improvements

1) - 2) = capital gain

if that answer is less than $250,000 (individual), there is no tax to be paid. 

but depending on your income level, there can be a twist! even if the gain is greater than $250,000 and then you subtract $250,000, there is still something left.  But at the lower income levels, the capital gains tax is zero! if your ordinary income plus the capital gains is less than $39k. the capital gains rate is zero.