I sold a house in April 2021. The software calculated my 24 consecutive months of living in that house to be April 28, 2016. My brain tells me it should be April 2019?

[crdwozan]

Due to the software error it holds that I owe taxes, as opposed to being exempt from taxation. Thanks

[GeorgeDenseff]

There is an error somewhere, either in the software or in some of your data.  Delete what you have entered for the home sale and enter it again.  If there is still an error get help from customer service.

[JulieS]

I assume this is the sale of your own home. 

When you come to the screen titled, Time You Lived in Your Home?, the question is, "Did you live in the home sold for at least two years (24 months) since April 28, 2016?"

To exclude the gain on the home you must have lived in the home for 24 months during the five year period prior to the sale, this is why the question includes April 28, 2016 at the start of your five year period. So there must be another reason for a taxable gain. 

Possible reasons for a taxable gain:

• You may have answered a question incorrectly, so please review the section.
• If you had depreciation on your home at some point, you will have to recapture the depreciation as ordinary gain. The exclusion does not apply the recaptured depreciation. 
• Your gain is more than the allowed amount of the exclusion.
   

[Opus 17]

There are a couple of things wrong with your question.  If this was your personal home, you can exclude up to $250,000 of capital gains (or $500,000 if married filing jointly) if you owned the home at least 2 years and you used it as your main home at least 2 of the previous 5 years.  The time that you use the home as your main home does not have to be consecutive.  It just has to total 2 years or more (730 days).

Turbotax should be asking you for the sell date (I presume 4/28/21).

Then, Turbotax should be asking you did you own the home at least 2 years (did you buy it before 4/28/19), and did you live in it at least 2 years of the past 5 (since 4/28/16).

Turbotax should not be telling you how long you lived in the home, it should be asking how long you lived in the home (how many days, or weeks or months.).  Again, to use the capital gains exclusion, you must have used the home as your main residence for at least 2 years or 52 weeks or 730 days, although they do not have to be consecutive.

Also, any gain more than your exclusion is taxable.  And if you used the home as a rental or for business at any time, you will owe recapture tax on depreciation you claimed or could have claimed.

Lastly, if you owned the home, used it as a rental, then moved back into the home before you sold it, your gain will not necessarily be covered because you run into something called the "non-qualified period" rule.  We can explain that more if that's what has happened.  

[crdwozan]

Thank you so much for your imformative reply. I'm still stuck. The screen that follows may be where I'm having a problem:

I have owned the house since 2010. So I counted the days I have used it as a second home (2,720 days) and I have calculated the number of days I lived there, in the past 5 years 1,038 days (which exceeds the 730 minimum). However, the software does not ask how many days I lived there with the house being primary. The software is calculating that $48,253 is subject to capital gains tax when my profit was only $70,214 which is under the $500,000 profit threshold for our joint return.

I hope I have provided adequate information. If not, let me know. 

Thank you for your help.

[Opus 17]

---

@crdwozan wrote:

Thank you so much for your imformative reply. I'm still stuck. The screen that follows may be where I'm having a problem:

I have owned the house since 2010. So I counted the days I have used it as a second home (2,720 days) and I have calculated the number of days I lived there, in the past 5 years 1,038 days (which exceeds the 730 minimum). However, the software does not ask how many days I lived there with the house being primary. The software is calculating that $48,253 is subject to capital gains tax when my profit was only $70,214 which is under the $500,000 profit threshold for our joint return.

I hope I have provided adequate information. If not, let me know. 

Thank you for your help.

---

Right, this is the problem of non-qualified periods of ownership.  Essentially, the law was changed in 2008 so that you could not claim the entire exclusion on a second home or rental house just by moving back into it for the last 2 years before you sell it.  This is not described in the current version of publication 523 but is included in the calculations in worksheet 3, section B, starting on page 15.

https://www.irs.gov/pub/irs-pdf/p523.pdf

Qualified use is:

a. any days you lived in the home as your main home

b. any days after the last time you moved out and before you sold the home, if those days were in the 5 years before the sale.

Everything else is non-qualified.

Let's take an example.

• You bought the home as a second home in 2010. You moved in as your main home in 2012 for 1 year, then moved out again.  (365 qualified days).
• You moved back into the home as your main home in 2018 and moved out in 2020 (730 qualified days).
• You sold the home 1 year later in 2021 (these 365 days are also qualified, because they occur in between the last day you used it as your main home and the selling day and it was within 5 years).
• All the other days when it was a second home are non-qualified.

I don't know it if Turbotax counts your qualified days for you or if you have to do it; make sure that if you moved out and sold the house later, that you count the days in between moving out and selling as qualified.

(To try and make this simple, if you moved (in, out, in, out, in, out, sold) then all the "ins" are qualified and the last "out" period is qualified, and the other periods are not qualified.

So after all that, the part of the gain that comes from non-qualified time is not covered by the $250,000 or $500,000 exclusion.

From your numbers, about 30% of your ownership is qualified, so 30% of your gain is covered by the exclusion and 70% of the gain is subject to capital gains tax.  Sorry.