We are separated currently and she resides in the house until settlement not sure if this makes the residency requirement for Capital Gains and the profit from the sale will be split 50/50.
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).
Gain or Loss = Sales Price minus Sales Expenses minus Adjusted Basis (Purchase Price plus the cost of improvements prior to the sale)
Selling cost can include escrow fees, legal fees, real estate agent commissions, advertising costs, and even home staging fees.
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 Premium 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
If you sell your main home that you owned and lived in as your main residence for at least 2 years, you can exclude up to the first $250,000 of gain if filing single or married filing separately, and up to $500,000 if married filing a joint return.
But, if you used the house in business (home office deduction, partial rental, or similar) you may have to pay recapture tax on any depreciation you took or could have taken while the home was used for business. Depreciation recapture is calculated and taxed before the $250,000 exclusion is calculated.
For spouses who are divorced or separated, the spouse who moved out of the house can still use this exclusion even if they moved out more than 2 years prior, as long as the other spouse still qualifies. (Except that, you generally can't use the exclusion more than once every 2 years. So if you used the exclusion on a different home in the last 2 years, you can't use it now even if you would otherwise qualify.)
If you did not get a 1099-S at closing, you do not need to report the sale on your tax return. If you did get a 1099-S, then each spouse reports half the home's cost basis and half the proceeds, and as long as each person's half of the gain is less than $250,000, it will be excluded by the tax program.