Rental property does not qualify for the VA capital gains exclusion. That is for the sale of certain small businesses. What "went wrong" was you answered yes (in the Turbotax interview) when asked if you qualified for this deduction.
If you disagree, The TurboTax (TT) accuracy guarantee process is explained here
but it only covers actual CALCULATION errors in the program, not user error (and it’s almost always user error), and it only pays any penalties or interest resulting from that error, not the taxes. Either way, you are still responsible for the increase in tax.
Code 52. Certain Long-Term Capital Gains
Provided the long-term capital gain or investment services
partnership income is attributable to an investment in a
“qualified business” as defined in Va. Code § 58.1-339.4 or
any other technology business approved by the Secretary of
Technology, it may be allowed as a subtraction. The business
must have its principal facility in Virginia and less than $3
million in annual revenues for the fiscal year preceding the
investment. The investment must be made between the dates
of April 1, 2010, and June 30, 2020. Taxpayers claiming
the Qualified Equity and Subordinated Debt Credit cannot
claim this subtraction relating to investments in the same
business. In addition, no investment is “qualified” for this
deduction if the business performs research in Virginia on
human embryonic stem cells.
Reference: <a rel="nofollow" target="_blank" href="https://www.tax.virginia.gov/sites/default/files/2017-01/763-2016-instructions.pdf">https://www.tax....>
If you want you can download the amendment program with the state program and open your tax file to review the actual screen where you made that choice ....
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/1894381-how-to-amend-change-or-correct-a-return-you-already-filed"...>