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It depends but if you did not rent it during 2016 and are claiming the home gain exclusion, you will want to report it under the home sales section.
Yes, you will report this as the sale of your primary residence.
You can take the gain exclusion as long as you considered the home your "primary residence" for 2 of the last 5 years. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. See Sale of Your Home for more information on the exclusion.
Although you may be able to claim the home gain exclusion on this sale, you will still have to paid a capital gain related to the depreciation taken on the home during the time it was a rental property.
When you sell a property that was used as a rental, you must pay 25 percent recapture tax (also referred to as Section 1250 recapture) as well as regular state income tax on the depreciation you claimed. (Remember the IRS will assume that you claimed the correct amount of depreciation every year—this is true regardless of whether you actually claimed any depreciation on your tax return).
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:
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.
To enter the sale of your primary residence, please follow these steps:
Say "yes" that you sold your main home and TurboTax will guide you on entering this information. You will need:
However if you did rent it during 2016;
Click this link for further information about reporting the sale of a capital asset
To enter your rental sale under the rental section in TurboTax Online or Desktop, please follow these steps:
To enter this rental sale under the sale of a business property in TurboTax Online or Desktop, please follow these steps:
I am not able to input in TurboTax an installment on primary residence turned rental, and get the 250000 exclusion. The case as follows: I lived in the home for 2 of the last five, I rented for the following 2 and I sold. When I try to do an installment sale it does not allow me to input the homeowners exclusions. In the case when you do an installment sale on home that has not been converted to a rental, Turbotax allows the exclusion. Is this a functionality that Turbotax does not have yet, or It is something disallowed by IRS. If it is just a functionality, I can manually input the exclusion in line 15 of form 6252 and redo the math.
If the last occupant to move out of the property was a paying tenant prior to the sale, you report the sale in the Rental $ Royalties Income (SCH E) section of the program. So on the screen titled "Home Sale" you have to click YES to indicate this sale "DOES" include the sale of your main home.
@Drindin See https://ttlc.intuit.com/community/taxes/discussion/principal-residence-exclusion-on-installment-sale...
You situation (primary residence converted to a rental that qualifies for the Section 121 exclusion and then sold on an installment sale) presents an issue for TurboTax.
If all of the profit (after the depreciation recapture) is being excluded then do NOT use the installment option even if you are selling it on an installment plan ... the depreciation recapture must be reported in the year of sale ... it is not eligible for installment treatment.
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@Critter wrote:
If all of the profit (after the depreciation recapture) is being excluded then do NOT use the installment option even if you are selling it on an installment plan ... the depreciation recapture must be reported in the year of sale ... it is not eligible for installment treatment.
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This could be the rationale for the fact that the scenario is not supported (or not very well supported) by TurboTax.
Hey Critter, thanks for responding. All the profit (after depreciation recapture) is not being excluded - hence as you suggest istallment option on installment plan will lead to tax deductions. That said, are you aware why this case is not supported by the platform. Is it that the TurboTax platform faces technological challeges to integrate the case, or it is the case that such a case is invalid per IRS regulations. In other words is that IRS does not allow to take the principal residence deduction and do an installment option on the profit after the primary residence deduction is taken?
@Drindin wrote:
Is it that the TurboTax platform faces technological challeges to integrate the case, or it is the case that such a case is invalid per IRS regulations.
It appears to be a TurboTax programming issue. An installment sale is permitted given your scenario just not, as @Critter mentioned, for recapture of depreciation (i.e., the depreciation component of the gain).
See https://www.irs.gov/publications/p537#en_US_2018_publink1000221670
You will probably need to use the downloaded version and get walked thru the direct entries in the FORMS mode to make it work ...
hello, i have same issue. Kinda. I sold my rental which i lived in for 2 years and rented out for 2 years so I qualified for the exclusion. I reported it as a sale of rental, last year’s taxes. About a year later, I sold my main home, will that be same exclusion? But I reported my rental as sale of business not sale if main home.
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