There used to be a provision for the sale of your personal home to be tax free if you put the money into your new home. However, this was replaced with the 250,000 dollar home sale exclusion if you lived in the home for 2 of the 5 years immediately prior to the sale. (There are section 1031 exchanges that still apply in regards to investment real estate property replaced with real estate property.)
See the following rules regarding qualifications for a home sale exclusion and steps for entering a qualifying home sale:
Ordinarily, you
need to meet the following requirements to exclude the sale of a home:
- You
owned the home and used it as your main home during at least 2 of the last
5 years before the date of sale.
- You
didn’t acquire the home through a like-kind exchange (also known as a 1031
exchange), during the past 5 years.
- You
didn’t claim any exclusion for the sale of a home that occurred during a
2-year period ending on the date of the sale of the home, the gain from
which you now want to exclude.
However, if you
don’t qualify for the full exclusion, you may qualify for a reduced exclusion
if one from any from a number of listed unforeseen occurred.
The reduced
exclusion percentage is calculated by dividing the number of days that you
lived in the home divided by the number of days in two years. That percentage
is multiplied by the full exclusion amount of 250,000 dollars (or 500,000
dollars for married joint filers).
The listed
unforeseen events are as follows:
Work-related
move. You meet the standard requirements if any of the following
happened during the time you owned and lived in the home you sold:
- You
took or were transferred to a new job in a work location at least 50 miles
farther from home than your old work location.
- You
had no previous work location and you began a new job at least 50 miles
from 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 standard requirements if any of the following
happened during the time you owned and lived in the home you sold.
- 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:
- Parent,
grandparent, stepmother, stepfather;
- Child,
grandchild, stepchild, adopted child, eligible foster child;
- Brother,
sister, stepbrother, stepsister, half-brother, half-sister;
- Mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law;
- Uncle,
aunt, nephew, niece, or cousin.
- 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.
Unforeseeable
events. You meet the standard requirements if any of the following
happened during the time you owned and lived in the home you sold.
- Your
home was destroyed or condemned.
- Your
home suffered a casualty loss because of a natural or man-made disaster or
an act of terrorism. (It doesn’t matter whether the loss is deductible on
your tax return.)
- You,
your spouse, a co-owner of the home, or anyone else for whom the home was
his or her residence:
- Died;
- Became divorced or legally separated;
- Gave birth to two or more children from the same
pregnancy;
- Became eligible for unemployment compensation;
- Became unable, because of a change in employment
status, to pay basic living expenses for the household (including
expenses for food, clothing, housing, medication, transportation, taxes,
court-ordered payments, and expenses reasonably necessary for making an
income).
An
event is determined to be an unforeseeable event in IRS published
guidance.
To enter the sale of your primary residence, follow this
path in the program:
- Go to the Federal Taxes category in your TurboTax file.
- Go to the Wages and
Income subcategory.
- Find the section
labeled "Less Common Income" in the "Your Income"
list.
- Click start or
update on the item labeled "Sale of Home".
- Answer yes, you did
sell your home in 2016.
- Indicate that you
Sold a Home and hit continue.
- Enter the address of
your home.
- Continue through the
sales and purchase data entry screens, and continue.
- On the screen
labeled "Time You Lived In Your Home", click yes or no regarding
the period of time that you lived in the home and hit continue.
- On the screen
labeled "Did You Use This Home for Anything Other Than Your Primary
Home?" indicate whether there was period where you moved out of the
home. If the answer is yes, the program will ask for the period of time in
days.
- On the screen
labeled "Another Home Sale", indicate whether there was an
excluded home sale within two years from the sale of your home.
- On the screen
labeled "Depreciation After May 6, 1997", indicate whether there
was depreciation for business usage. If you answer yes, TurboTax will ask
for the total depreciation taken since 5-6-1997.
- The next screen will
tell you that you qualify for the exclusion and that you don't need to
report the sale. Hit continue.
- The
next screen should ask "Include Sale of Home in Return". Check
the box at the bottom here, and the sale should be included on your
return.