Can TurboTax Premier accurately handle sale of home jointly owned with ex-spouse?

[RobertSA]

I live in MA. My first wife and I divorced in 2017; we both kept half-ownership of our house and she lived in it with our teenagers. She sold the house in 2022; we split the proceeds, which were substantial but which in total were under $250K.

As I read IRIS Publication 523, I can exclude my income from this sale (which  was less than $100K) from my taxable income. I refer in particular to this passage:

"Separated or divorced taxpayers.

If you were separated or divorced prior to the sale of the home, you can treat the home as your residence if:

• You are a sole or joint owner, and

• Your spouse or former spouse is allowed to live in the home under a divorce or separation agreement and uses the home as his or her main home."

I am using the desktop product TurboTax 2022 Premier. I cannot seem to get Premier to agree this income is not taxable. How do I do so? Should I just put down the home as my primary residence without any other explanation? That seems fraught with peril.

[DMarkM1 · Accepted solution]

You are correct.  You are to "Treat the home as your residence for the time your spouse or former spouse lived in in it due to a divorce agreement."  You answer the home sale questions as if you lived in the home and since that residence and ownership meets the 24 months in the last five years prior to the sale test, you qualify for the exclusion of up to $250K of gain on the sale.  This also assumes no other home sale exclusion in the past two years.  

 Keep with your tax records proof that you meet this exception should it ever come up in the future.  There are no special forms or elections to be made on the tax return.       

[RobertSA]

Thanks. All that you specified pertains. I just didn't want to expose myself to being penalized in an audit.