My Mom (87 years old) lost her husband within 2 years of selling her home this year but only showing a 250000 write-off ... should be 500000

[topprice]

Should she file as "married joint" ... even though he passed 18 months ago??

[Mike9241]

One of the requirements for filing jointly in either of the two years after her spouse died requires that her home was the main home for the entire year of the taxpayer's dependent child or stepchild. 

However, for the $500,000 home sale exclusion, all these tests must be met:

1) the sale occurs within two years of the death of their spouse,

2) either spouse met the two-year ownership requirement for the residence immediately before their spouse died,

3) both spouses must meet the two-year use (occupancy) requirement immediately before their spouses died, and

4) neither spouse may have used the exclusion during the past two years.

While it seems she would have the file as single, if all the above tests are met, she's entitled to the $500,000 exclusion.  Noone in this forum can see the return. So we don't know if you answered a question(s) incorrectly or if there's a bug in the program,

There are questions about being married and meeting the use-and-ownership tests. See 2) and 3) above and if met, disregard the fact that her husband died 

there is another question that says check the box about being a widower, no remarriage, and the other spouse qualified for the exclusion before their death. 

again assuming all the requirements are met the $500,000 exclusion should be avaiilable 

[VolvoGirl]

And what state are you in?  You should get a step up in  your basis(cost) when your spouse died.    My husband died in 2023 in California which is a comunity property state and I got a step up to the full value on date of death.   We bought it in 1997 and now the value is 4 times as much.  So if I sell the profit should be very small.  

I would check with an accountant or lawyer and probably a real estate agent to get the value on date of death.  

[rjs]

Getting an exclusion of only $250,000 instead of $500,000 in your mother's situation appears to be a bug in TurboTax. I tried it in a test tax return and had the same problem. I have reported the problem to TurboTax.

Your mother cannot file as married filing jointly.

[GabiU]

Thanks for letting us know of this thread, @rjs 

Hi @topprice 
I'd like to get more information on this report. As I research the topic, can you send us a sanitized file? Here's how: 
In TurboTax Online​

1. Sign-in to your online account. ​ 
2. Select "Pick up where you left off"
3. Click on “Tax Tools” to the left hand side of the screen. ​ 
4. Select "Tools" 
5. A drop-down will appear. Click on “Share my file with  Agent”. This will generate a message that a diagnostic copy will be created.
6. When the token is generated, be prepared to type in your notes or in a message (unable to copy and paste) 
7. Click “OK”. The tax file will then be sanitized and sent to us. This action will generate a Token Number  
8. Please respond directly to this message and provide the Token Number that was generated. 

[GabiU]

I'd also like to add our condolences to you and your family's loss. I hope to get the information from the product into the correct hands as soon as possible. Thank you for your cooperation and understanding.  

[Opus 17]

She probably received a partial or full stepped up basis.  If, after taking the stepped up basis into account, her gain is less than $250,000, then she can file without waiting to resolve the problem.  Please ask for further help if you need help determining her basis.  

[rjs]

@topprice 

Here's a workaround that I think will make TurboTax give you the $500,000 exclusion. Before you try this workaround, please send the sanitized copy of the tax return that @GabiU requested so that the TurboTax software people can work on the problem.

The workaround involves going through Smart Check twice and correcting errors. The first error will say that a question about the spouse living in the home for 2 years is not answered. Select Yes as the answer. That will end the Smart Check (if there are no other errors). Run Smart Check again and you will get a new error on a question about the spouse excluding gain on another home. Select No as the answer. TurboTax will then give you the $500,000 exclusion.