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That's good planning. Go to the section for "sale of assets and other things" on the income page, and report the sale of the home. Use "my home" for the type of asset. I believe the program has a smart worksheet that will guide you to enter adjustments to the purchase price (cost basis) and selling price. (If not, enter the adjusted cost basis when the program asks you for purchase price.)
When finished, the program should say something like, "you qualify for the exclusion and you don't need to report this sale or pay tax." but give you some check boxes for alternative situations, and there should be a check box for "I want to pay tax and not use the exclusion".
see IRS lInk and requirements - appears you can exclude the gain of one or the other if you sell within two years. See IRS publication 523
Qualifying for the Exclusion
In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Refer to Publication 523 for the complete eligibility requirements, limitations on the exclusion amount, and exceptions to the two-year rule.
The choice is yours. However please note that to qualify for the capital exclusion, you must have lived in the home as your primary residence for at least 2 years in the 5 years preceding the sale.
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