Sale of Main Home Question

[robdmd123]

Hello, we sold a main home that was in my wife's name, and I am the main filer for our joint return.  The main home was sold at a loss.  Will we still have to wait 2 years to sell our current/new main home to get the allowed exclusion of capital gain, since we sold the old home at a loss and there was no gain exclusion?

Also, is the 2-year period based on the sale date (sold date on the settlement stmt) or the calendar year?  For example, if we sold the old home on 6/1/2021, would the 2-year period be 24 months from old home sale date, say after 6/1/2023?   Or can we sell the new main home before 6/1/2023, say on 3/1/203, since the old home sale was in the tax year 2021 and new home sale will be in the tax year 2023?

[ColeenD3]

Yes, you will not have to wait. You can only exclude the gain once in any two-year period.

The two-year period runs from the sale date to sale date. If you sold on 6/1/21, you would to wait have until 6/1/2023. Keep in mind that the IRS counts days (730 for non-leap years)

[robdmd123]

Hello, just to clarify your response, if I had a net loss on the old main home sale, and there was no "gain exclusion" because there was no "gain", I can sell my current home within 2 years and claim "gain exclusion" if there is a gain?  We have lived in my current home for more than a year before selling the old main home (which we lived for more than 2 of the last 5 years).

[PattiF · Accepted solution]

Yes, you can claim the "gain exclusion".

You are eligible to exclude the gain from your current home as long as you use and own the home as a principal residence for two of the five years before the sale. If you have not excluded gain on another home sold during the two years before the current sale, then you can exclude the gain for your current home as long as the two-year period is being met.

[jmbradshaw144]

It is clear that I should be able to exclude the gain, but TurboTax says I cannot and adds the income to my taxes. How do I get past this issue in TurboTax or get help from TurboTax?

[FangxiaL]

If you believe you can exclude all the capital gain from selling your main home, you might not be required to report the transaction on your tax return.

@jmbradshaw144

[jmbradshaw144]

I received a 1099-S. PaulaM (Employee Tax Expert on this site) says, "It is not unusual to not receive a 1099-S form. You can ask the closing attorney if one is being sent, but do not request one if its not needed. If you receive the form, you must enter the sale on your tax return. If you don't receive the form and you qualify for gain exclusion (see below), then the sale does not need to be entered on your return." Note that the bold/italics are mine.

Despite the fact that I clearly meet all the requirements to qualify for the exclusion, TurboTax Premier Desktop says I do not qualify and adds the $230K to my income. How do I report this issue to TurboTax in order to resolve the issue?

[RobertB4444]

@jmbradshaw144  When you entered the sale into TurboTax you should have gone to 'Income and Expenses' and then scrolled down to 'Less Common Income' and then 'Sale of Home (Gain or Loss)'.  The program should ask you all of the questions relevant to excluding the income from the sale of your main home.  

If TurboTax is including the income on your return then please revisit this section and go back through the questions and make sure you answer them carefully and that all of the information entered is correct.  As long as you lived in the home for two out of the last five years and the gain was less then $250,000 (or $500,000 if you're married) you should be able to exclude it.