We sold our primary residence in 2021. We received a Substitute Form 1099-S and a settlement statement.

[tinatoth]

TurboTax seems to want to include a lot of information that doesn't seem to calculate correctly, and will not let me select the box stating for a third time this is a primary residence. We did not have capital gains on the entire proceeds as we had a mortgage on it. If I enter the mortgage payoff with the total, it looks like we had a net loss, which isn't accurate, but if I don't, it thinks I need to pay a huge amount in capital gains taxes, even though we meet all the criteria to not have to. Do I even need to enter this information since it was a primary residence and under the allowable amount for a capital gains that need to be reported?

[tagteam · Accepted solution]

You need to report the sale if you received a 1099-S.

Do not factor the mortgage payoff into the calculation of gain/loss. Instead, subtract your adjusted basis from your sales price (less selling expenses).

[DoninGA]

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. You will need the online TurboTax Premier or Self-Employed edition to report the sale if you are using the online editions. Make sure that you indicate that you want the sale of the home reported on your tax return.

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Less Common Income
On Sale of Home (gain or loss), click the start or update button

A mortgage payoff is not used in the calculation for the Gain or Loss on the sale of the Home.

Gain or Loss = Sales Price minus Sales Expenses minus Adjusted Basis of the home (Original Purchase Price plus the cost of any improvements to the home prior to the sale)

If you never used the home as a rental or in a business then when asked Did You Use the Home for Anything Other Your Primary Home? answer NO.

[tinatoth]

Is the mortgage payoff to be included in the adjusted basis then? I don't think I'm calculating the adjusted basis correctly. And again, the capital gains are under the amount for a two people for a primary residence, but if I remove the payoff, Turbo Tax is telling me I owe $30 in capital gains tax. I've sold a primary residence before and never had to go through these steps, and I'm afraid it's just not making sense and maybe over my tax skill level. And I've worked in accounting and finance for over 20 years....

I don't mind reporting it, but it's complicated and I don't feel like the steps are well outlined for a layman. Attempted to get TurboTax Live help just have me going in circles.

I do appreciate the replies.

[tinatoth]

I should also add that getting the original "buy" price is complicated in that we bought the land, paid it off in full with proceeds from the sale of our prior home back in 2016. Then had a building loan for the house, after which it converted to a traditional mortgage which wasn't the actual purchase price total (land + build) as part of it was paid with the asset of the land, if that makes sense. All that means we are sort of guesstimating on the actual purchase price based on paperwork we no longer even have from six years ago.

[tinatoth]

Also we are using TurboTax home and business as my husband is now a contract worker.

[tagteam]

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@tinatoth wrote:

Is the mortgage payoff to be included in the adjusted basis then?

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No, the mortgage payoff is not included in the adjusted basis.

[tagteam]

Add the price you paid for the land with the total you paid to have the home constructed (plus any improvements since the house was built) and you should have your adjusted basis. 

[tinatoth]

Further investigate shows that Turbo tax is not using the Section 121 exclusion. How do I get that to engage?

[tinatoth]

To expound:

We meet the Ownership time test, primary residence test, and have not excluded the gain from another home in the two year period before the sale. We are married and the capital gain is under 500k. So how I read it, we should be excluded.

[DoninGA]

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@tinatoth wrote:

Further investigate shows that Turbo tax is not using the Section 121 exclusion. How do I get that to engage?

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It depends how you answered the questions in the program for selling the home.

Did you live in the home you sold for at least two years (24 months) in the five year period from the date of sale?  Answer Yes if this is true.

If married did your spouse live in the home for at least two years (24 months) in the five year period from the date of sale?  Answer Yes if this is true.

Did you sell another main home less than two years before the date you sold this home?

Answer NO if you did not.

[Edited]

[Vanessa A]

How did you enter the 1099S?

If you take the steps below to enter your 1099S, you will come to a screen that ask if it was your primary home and for how many days.  It will then ask if you had any other home sales and a few other questions.  Depending on how you answer each question, your next question may be different, but it will tell you at the end of the section, either Good News you don't have to pay taxes or it will tell you that you do not qualify.

• Federal
• Income
• Show more next to Less Common Income
• Start next to sale of your main home
• Then walk through and enter the amount your portion of the sale and expenses

[tinatoth]

Thank you for the answer.  Where can I find those questions? I do not recall seeing them.

[DoninGA]

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@tinatoth wrote:

Thank you for the answer.  Where can I find those questions? I do not recall seeing them.

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I had to edit my original answer as I made some typo's.  It should read -

Did you live in the home you sold for at least two years (24 months) in the five year period from the date of sale?  Answer Yes if this is true.

If married did your spouse live in the home for at least two years (24 months) in the five year period from the date of sale?  Answer Yes if this is true.

Did you sell another main home less than two years before the date you sold this home?

Answer NO if you did not.

Go back to the Sale of Home section to review your answers -

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Less Common Income
On Sale of Home (gain or loss), click the start or update button

[tinatoth]

Feeling dense here... Tina was doing the taxes but had to work. I work remote and am trying to wrap it up so I am not as familiar with the software. In my list of forms I see numerous 1099 forms for HSA, IRAs, etc but do not see a 1099-S form listed.  How do I open a 1099-S to fill it out?