house sales

[bmyers7711]

Got married in 2019 and wife moved into my house and sold her home in 2020 when her son moved out.  2022 I get transfered and sell my house.  Turbo tax said we owe $90k so I filed an extension and haven't found if the amount is correct.

Brian

[VincentL12345]

There are three tests you must meet in order to treat the gain from the sale of your main home as tax-free:

• Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous, nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary residence, then rented it out for two years prior to the sale, for example, you would still qualify under this test.
• Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
• Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.

• If you're married and want to use the $500,000 exclusion:

  • You must file a joint return.
  • At least one spouse must meet the ownership requirement (owned the home for at least two years during the five years prior to the sale date).
  • Both you and your spouse must have lived in the house for two of the five years leading up to the sale.

[MelodyB]

Hi Brian!

If you both sold your home it could be that you both have capital gains on the homes you sold.  Were both homes lived in for 2 out of the 5 previous years before the homes were sold?  I would definitely want to connect with a tax expert to see if that is a correct amount that is showing as your balance due.

I hope that helps!

MelodyB

[marctu]

@bmyers7711 so you may have to supplement the facts in your questions.  Generally, if you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. 

In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

You would appear to meet the test based upon the facts you laid out below.  I am not sure if your wife does though based upon the facts below.  When was it her primary home in 2022 and when were you transferred and sold in 2022 are important.  

Furthermore, there could be a partial exclusion due to the move as well.  If you moved due to a job change of more than 50 miles, you do qualify for a partial capital gains exclusion.  If you moved due to a job change of more than 50 miles, you do qualify for a partial capital gains exclusion. The exclusion is based on the shorted of three time periods; how long you owned the home, how long you used it as your main home, and how long since the last time you used the exclusion.

Also left out is how much the house was purchased for and sold.  Based upon the relatively short time period (three years), it would appear unlikely that the sale price exceeded the purchase price by at a minimum $250,000.  

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

**Say "Thanks" by clicking the thumbs up icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

[bmyers7711]

I think the issue is with:

"You have not excluded the gain on the sale of another home within two years prior to this sale."

We claimed the sale of the first house and didnt take a hit.

I owned my house exactly five years and it was my primary residence.

Wife owned her house +20 years.

[marctu]

Well that could be it as well, since that would be within the two years.   How much was the excluded gain in 2020?  What was your calculated gain.

2020 could still be amended though you cannot change the filing status from Married Filing Jointly to Separately.  If the gain is less then the 2022 gain this would be to your benefit.  

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

**Say "Thanks" by clicking the thumbs up icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

[bmyers7711]

We meet the use and ownership teats. 

Both houses sold for around $250K each and gains for both combined was around $275K. 

We file joint and moved >50miles for job transfer.

I will research section 121 exclusion.

[marctu]

@bmyers7711 glad I was able to potentially help you.  If we had this talk in 2020, I would have probably told you to look at filing as married filing separately for 2020.  Hindsight is always dicey though. 

Hope the new area is treating you well also. 

Be well and safe.

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

[bmyers7711]

Thank you. 

The gain on the wife's house was less then mine.