If the gain on sale of your house is not taxable on your federal tax return it should also not be taxable on your Colorado state tax return. You shouldn't have to do anything special on the state return to exempt the home sale income from taxation. You should first look on your federal tax return form 1040 to make sure you don't see taxable income there from the gain on sale of your home. It would appear on line 7 of your form 1040. Then, look at your state tax summary to see if the income is included in your taxable income on that return.
To view your form 1040 and schedule 1 to 3:
- Choose Tax Tools from your left menu bar in TurboTax Online
- Choose Tools
- Choose View Tax Summary
- See the Preview my 1040 option in the left menu bar and click on it
- Choose the Back option in the left menu bar when you are done
To see your state tax summary, follow the instructions above while working in your state tax return and stop on the View Tax Summary page.
It is possible that the sale of the property is showing on the return but it is not showing as taxable, in which case you should not have a penalty associated with it. In that case, the penalty may be legitimate, but not caused by the gain on sale of your home.
If you find the gain is showing as taxable on your Colorado return but not on your federal return, it may help to delete the state return and start it over. You will see an option for that when you start the state return.
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