Sale Of Primary Residence

[ttkathyc]

I am using Turbo Tax Deluxe Desktop.  We recently sold our primary home which we had both lived in for more than 2 of the last 5 years.  My understanding is that we should not have to pay capital gains on the increase in value if it is less than $250,000.  However Turbo Tax is showing that we do owe.  

We purchased the land the home we recently sold and then had a home built on it a couple years later.  The only Hud1 date and amount I have is from the purchase of the land which I entered into TurboTax.  Where do I show the cost of the home build?  Turbo Tax never asked me about the 2 of the last 5 years which I think is key to getting the capital gains to not be taxable.

Everything we put into the house (lot & construction) that was sold is still less than $250K so that limit is not the problem.  I deleted the 1099S entry and I will try to enter it again after getting some feedback here.

Anyone have any suggestions?  Thank you for your time.

[TomK2023 · Accepted solution]

The program thinks that your land cost is your only cost, so when it is compared to the sale price, it looks like a huge gain.

However, your "Cost Basis" isn't just the land; it is the (Land Cost + Construction Costs + Capital Improvements).  The program doesn't have a separate box for "construction costs"... you need to add all these costs together to get a total (which you will enter as the "Adjusted Basis").

Delete the entries from your 1099-S (or delete the form entirely).

Here's the general procedure for viewing a list of all the forms in your return and deleting unwanted forms, schedules, and worksheets in TurboTax Online:

1. Open or continue your return.
2. On Tax Home, select Start, Continue, or Pick up where you left off to enter your return.
3. In the left menu, select Tax Tools and then Tools.
4. In the pop-up window Tool Center, choose Delete a form.
5. Select Delete next to the form, schedule, and worksheet in the list and follow the instructions.

TurboTax FAQ: How do I view and delete forms in TurboTax Online?

Enter the Sale of Home here:

1. Open or continue your return.
2. Search for "sale of home" in the Search box.
3. Click on "jump to sale of home" link
4. Answer the interview questions.  Date you purchased home should be your construction completion date (or when you moved in).
5. Eventually, you will land on your ''Home purchase price and basis details" where you will enter your total adjusted basis cost.  

There is a $250,000 (MFJ $500,000) capital gains exclusion on the sale of you home if your filing status is Single.

[ttkathyc]

Thank you for your reply.  I deleted the original file and started again.  Instead of jumping around on my own entering data, I went through each question in sequence and that worked much better for me.  The first time around I wasn't asked about residing in the home 2 of the last 5 years.