Due to a job change requiring relocation over 1000 miles away, we sold primary house in Mar-23 after residing in it for 18-mon, with a $40k gain, do we file tax forms?

[dil2dilu]

We purchased a home in Colorado in August 2021 for our primary residence and lived there until February 2023. Due to a job change requiring relocation over 1000 miles away, we sold the house in March 2023 after residing in it for only 18 months, resulting in a $40,000 gain. Two questions: 1) As the sale is due to relocation and falls within the partial exclusion criteria, is it necessary to report this on tax forms? 2) Does this gain get added to the Adjusted Gross Income (AGI) for the year?

[Mike9241]

Yes I would report the sale. Turbotax has a home sale worksheet that should be used to report the sale properly. The IRS will get a 1099-S. it will not know if any portion is taxable. Your partial exclusion should eliminate any taxable amount but the IRS won't know this unless you file.  Your other option is to file nothing and wait to see if the IRS sends you a notice 

[DoninGA]

Since this was a work related move you would be eligible for a partial exclusion on the gain from the sale.

Assuming you are married filing jointly and both of you lived in the home for the 18 months prior to the sale your exclusion is $500,000 * 18/24 = $375,000.  Since your gain is under the maximum exclusion you do not have to report the sale on a tax return.

However, if you received a Form 1099-S for the sale then it has to be reported on your tax return.  But there will not be any gain entered on the return so will not affect your AGI in any way.