sale of second home that was previously my primary residence and had home office

[The Flash]

I sold what was my personal residence for almost 30 years in 2018. I moved into the home where we live now in 2013 and the 1st home sat unoccupied for about 5 years (we had about 30 years worth of 'stuff' stored there). I had a home business in that home for most of the time that I live there.

TurboTax asks if I used the property in business and then if I say 'Yes' it says I should enter the home as a business property but it wasn't purchased as a business property but as a home.

How do I properly enter it as a home sale for a home in which I had a home business?

[DoninGA]

Since you have not lived in the residential property for at least two years in the 5 year period from the date of sale it is not a primary personal residence but a second home that was used as a business property.

Report the sale as Business Property.  The prior depreciation for the home business has to be recaptured as a Section 1250 Gain.

[The Flash]

Hi, 

Thank You for your reply.

After I initially posted my question, I remembered that even though my wife and I moved to the new home, our adult son (not a dependant) who was living with us at the time continued to live in the house for a couple of years after we moved out (which we were thankful for because we didn't really like the house sitting empty);

however it was not my wife's and my personal residence for that 5 years. 

Does this make any difference?

[DoninGA]

Sorry, no.  Having your son live in the home does change the fact that you, as the owner, did not live in the home for at least two years in the 5 years prior to the sale.

[The Flash]

Ok, it looks like I will have to enter average business use and personal use percentages separately ?

[DoninGA]

Was this a rental property where you had income and expenses reported on a Schedule E?   Or was this just a second home that happened to be used for business for a period of time?

If not a rental you would not have business use and personal use.

[The Flash]

Not ever a rental. I ran my business from my home for all of the years that we actually lived there, about 27 out of 31.5 years that we owned it.

[DoninGA]

Then it is entered on your tax return as a Business Property sale.

You report the date of Purchase, the date of Sale, the Total Sales Price, 

[DoninGA]

Sorry, hit the Post button by mistake.

You report the date of Purchase, the date of Sale, the Total Sales Price, the Cost of the Property (Purchase price, cost of improvements and sales expenses) and the Depreciation taken on the property.

In TurboTax enter sale of business property in the Search box located in the upper right of the program screen.  Click on the Magnifying Glass.  Click on Jump to sale of business property

[The Flash]

Thank You DoninGA, this is very helpful!

For the years that no deduction for a home office was taken because of income limitations, do I have to recapture those years as 'allowable' depreciation?

[The Flash]

Under the section: Sales of Business or Rental Property it says to be sure to compute the amounts of your sales price and the property's cost that relate to the business portion only.

The "business portion" in that sentence is blue underlined and links to the following On Demand Tax Guidance window:               

If you used the asset 100% for this business, enter total amounts here. If you used the asset for any other purposes, you must allocate the total amount to the percentage of use for this business.

For example, if you used this asset an average of 75% for business over the course of your ownership, and you sold the asset for $1,000, you would allocate the net sales price as follows:$1,000 X 75% = $750

Allocate your cost or basis in the same manner.

Report the non-business percentage of the property separately as the sale of "other investment or personal use property."

Is doing this essentially 'separating the property, and where would I end up entering the 1099 info for the sale?

[DoninGA]

Yes, you would be separating the property between personal use and business use.

The percentage of business use would be reported in the Sale of Business Property section of the program.

The percentage of personal use would be reported in the Investment Income section of the program.

To enter an investment sale other than from a brokerage account (1099-B), follow the steps below.

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Under Investment Income
On Stocks, Mutual Funds, Bonds, Other, click the start or update button

Or enter investment sales in the Search box located in the upper right of the program screen.  Click on the Magnifying Glass.  Click on Jump to investment sales

On the next screen, click Yes

On the next screen, click No

On the next screen, choose the option for Second home and select Personal use only.  Continue with the section until it completes.

If you received a Form 1099-S enter the proceeds between the business and personal use.

For how to report the home office depreciation when it was not reported on the prior year tax returns due to income limitations, I cannot answer that question with any confidence.

Contact TurboTax support to see if you can get an authoritative answer from a CPA.

Use this website to contact TurboTax support during business hours - https://support.turbotax.intuit.com/contact/
Support can also be reached by messaging them on these pages https://www.facebook.com/turbotax/ and https://twitter.com/TeamTurboTax

[The Flash]

Thank You again DoninGA!

You have helped me immensely as well as helping to relieve some stress. 

I also appreciate in your last answer that you showed wonderful humility in stating that you couldn't "answer that question with any confidence"....again, Thank You!