We sold our house to my husband's job through a relocation buyout agreement. They paid off our loan and issued us our equity. Will we have to pay taxes on this money?

[Hal_Al · Accepted solution]

No.

The capital gain on the sale of your primary home is not taxable (up to $250K, $500K married). To be eligible you must have lived in and owned the home for at least 2 out of the 5 years prior to sale. You do not even need to report it on your tax return, unless you got a tax document, usually a 1099-S. The 1099-S may have been included in your closing documents.

Even if you got a 1099-S, TurboTax can handle it being reported without being taxed.

 In TurboTax (TT), enter at:

- Federal Taxes tab

 - Wages & Income

Scroll down to:

-Less Common Income

    - Sale of Home

Job relocation is an exception to the 2 year rule. Your new job location must be at least 50 miles farther from the sold home than the old job location. You are entitled to a prorated amount of the $250,000 ($500,000 married) exclusion. Example : if you lived in the old home 438 days you could exclude up to 60% {438/(365x2)} or $150,000.  The exception is allowed if the move was for employment or health reasons or "unforeseen circumstances".