When you enter a 1099-S, the entire gross proceeds of the sale will be taxable income until you provide the cost of the home and details that may qualify you for the sale for the primary residence exclusion. It sounds like you are just missing the primary residence exclusion, but double check you have included all your costs in case you do not qualify for the exclusion
Go back into the "Sale of Main Home" section.
- Enter the sales expenses, such as commissions, transfer taxes, etc.
- Enter the date you bought the house
- Enter the cost basis of the home, which is the original cost plus permanent improvements
- Finally, and most importantly, you must confirm the time you lived in the home by answering the question Did you live in the home for at least 24 months since [date of sale] on the screen Time lived in the home. If you owned and used the property as your primary residence for at least two out of the five years prior to the sale, your total gain of only $75,000 (well below the $250,000 exclusion for individuals or $500,000 for married couples) will not be taxable. If you did not use the home as a primary residence, then an increase in tax of around $26,000 may be correct, especially if you owned the home less than one year and are being taxed at short-term rates.
