Sale of a second? home

[jbowers53]

Our situation: We bought House A in 1997 and was our principle residence. We bought House B in 2008 because we outgrew House A. However, due to the housing collapse in 2008 we could not sell House A, but instead, turned it into a rental. House B was then our principle residence. In 2023 we downsized and moved out of House B and back into House A. House A became our principle residence in once again. House B was vacant in 2023-24 while we cleaned it out and prepared it for sale. In 2024 we sold House B.

Am I correct that House B is treated like a second home for tax purposes and the information entered under Investments in TurboTax premier?

Also, what improvements to the home count towards the Adjusted Basis? As opposed to repairs?

Thanks.

[KeshaH]

Assuming you lived in House B for 2 out of the five years leading up to the date of sale, you can treat this home as your principal residence for purposes of excluding the gain on the sale. If you are filing a Married Filing Joint return, you can exclude up to $500,000 in gain. You wouldn't be able to exclude the gain on the sale of another home for two years. 

See this TurboTax help article for steps on entering the sale of your main home in TurboTax.