Sale of primary residence

[DaveAldous]

My wife and I purchased our primary residence in 2007 and sold it in 2020 for a small profit which was much less than the $500,000 exclusion.   It was never rented out, never used as an office deduction and we lived in it continuously as a primary residence from 2007 until 2020.  We've answered all the questions appropriately in Turbotax but the software tells us that we "don't qualify for an exclusion of the gain on the sale of your home".  What are we doing wrong?  Thank you.

[tagteam]

You can only take this particular exclusion once every two years. 

Thus, did you answer the question as to whether you intended to sell another primary home within the next two years?

Go through the screens again, carefully this time.

[DaveAldous]

Thanks for your quick reply.  The question Turbotax gave us was "Did David/Cynthia sell another main home after 6/30/2018 which is the date two years before you sold the home?" We went back and answered "No" which is the same answer we gave it the first time and this time we got the correct response which was we don't have to pay any tax on the gain.  I have no idea why we got it this time other than we went back and forced correct entries on the Home Sale Worksheet.  Anyway, it appears to be fixed.  Thanks again for your help.

[DianeW777]

Let's go step by step to see if you can clear this up. 

1. Scroll to Less Common Income > Select Sale of Home (revisit or update) 
2. Continue to indicate you sold your home > Edit or add your home address and ownership > Continue
3. Enter the sales date, Selling Price and Sales Expenses > Continue
4. Enter the date acquired and the cost of the home (includes any capital improvements for the period of ownership > Continue
5. Continue past the 'Less than two years' screen > No the home was not used for anything else > Continue
6. Select No another home was sold after _____ date > Select Both of us owned the home > Continue
7. Select Other reasons as the Reason for Sale > Select None of these for Other Reasons for Sale > Continue
8. Select No for Depreciation After May 6, 1997 for both of you > Continue to answer the remaining questions.

I am seeing the same message that you see, however the gain is not transferred to the Form 1040, or Schedule D.  Because you know that the gain is within the exclusion limits you can enter the same cost as the selling price if you find the gain is carrying over to the 1040.

y using the Tax Tools you can take a quick review of your 1040:

• To find Tools: 
  • Sign into your TurboTax account and open or continue your return. 
  • Select Tax Tools in the left menu. 
  • You'll find Tools beneath Tax Tools.
  • Select View Tax Summary
  • Select Preview My 1040 (left black panel)

[tagteam]

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@DaveAldous wrote:

Thanks again for your help.

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No problem. It is easy to miss one of those questions on the screens in that particular section.

[DaveAldous]

Thank you for your reply.  I'm beginning to think there might be something wrong with TurboTax.  I went back in and retraced my steps per your instructions and after thinking the problem was resolved, it once again is telling me that I owe tax on the gain which did transfer to the 1040.  Additionally, I never see the reasons for sale question or the Depreciation after May 6, 1997 question.  My wife and I have bought and sold real estate for over 20 years and I've never run in to this problem with TurboTax before.  Thanks again for your detailed response.

[tagteam]

@DaveAldous 

Are you using a desktop version of TurboTax? If so, check the Home Sale Worksheet in Forms Mode.

[DaveAldous]

Thanks for your reply.  I checked the Home Sale Worksheet previously and had to change the answers to questions 10 & 11 to "Yes" which had been checked "No" even though the questions in the Step by Step section of TurboTax were answered correctly.  I also had to force a "Yes" to question 14 as both "Yes" and "No" had been grayed out.  I have no idea what's going on but I'll be forced to correct the 1040 and Sched D manually if I'm unable to get back to where I was.  Very aggravating!  If anyone else is having this problem please speak up.