How do I enter the sale of a home?
Enter the sale of a primary residence on the HOME screen. The software produces Wks 2119. If the taxpayer qualifies for the Section 121 exclusion amount and the gain on the sale exceeds that, the software also produces a Schedule D and carries the excess to that. The maximum exclusion is $250,000 (or $500,000 for a joint return). A reduced maximum exclusion may apply in some cases.
For example, if a taxpayer is filing single, the maximum exclusion amount is $250,000. If the taxpayer qualifies for the maximum exclusion and
- gained $125,000 on a sale, the entire amount is excluded and no amount is reported on Schedule D. Wks 2119 displays the exclusion calculation, but nothing carries to Schedule D.
- gained $300,000 on the sale, Wks 2119 displays the calculation and the $50,000 excess is carried to Schedule D Part II as taxable gain.
In the Reduced Maximum Exclusion area on the HOME screen, remember to enter the number of days during the last five years in which the taxpayer (and spouse if filing MFJ) used the home and the number of days the home was owned during the past five years (5 years X 365 days, or 1825, is the maximum). The software does not calculate the maximum or a reduced exclusion without these entries.
Miscellaneous options. If you want to carry a taxable gain to Form 4797, select the option in the Miscellaneous area. Help for this field (select the field and press F1) advises that if a home was lived in and then converted entirely to rental or business use, the entire transaction must be shown on Form 4797.
Note: A loss on the sale of a primary home (if not used in a business) is not deductible. See Publication 523 - Selling Your Home for more information.
The exclusion for a home sale is not showing on a return.
You must complete the Number of days the home was used and owned fields on the HOME screen in order for the exclusion to appear.
Unless the gain is more than the exclusion, you will not see the sale reported on Schedule D. Look for Wks 2119 in view mode of the return to explain the calculation of the exclusion.
You can choose to force exclusion or loss adjustment to be printed on Form 8949/Schedule D by using the checkbox on the HOME screen in the miscellaneous section located at the top right of the screen. This will produce a Schedule D/Form 8949 in view mode even when it is not required to be produced.
In some situations, it may be necessary to force the taxable gain to show on Form 4797 by checking the option Carry taxable gain to 4797 on the HOME screen; see the F1 field help for details.
The checkbox 1099-S Was Received (Drake23) carries the gain or loss adjustment from the sale of the home to Form 8949.
Military Exclusion
Certain military taxpayers may be eligible for a longer test period to qualify for the exclusion. If they used the property as their primary residence for at least 2 out of the last 15 years, they may be able to exclude the gain. Per Publication 523, taxpayers
"...may be able to meet the 2-year residence test even if, because of [their] service, [they] didn’t actually live in [their] home for at least the 2 years during the 5-year period ending on the date of sale."
"The period of suspension can’t last more than 10 years. Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. You can’t suspend the 5-year period for more than one property at a time. You can revoke your choice to suspend the 5-year period at any time."
In Drake Tax, if they qualify for a military exception that does not meet the regular test, you will not enter anything on the HOME screen. Instead, use the 8949 screen to report the sale and make an adjustment to the gain using code H.
States
Some states follow the federal guidelines for exclusion and others do not
For New Jersey, if the sale needs to flow to the NJ return, you must make an entry on NJ DOP screen for "other net gains." This will carry the amount through the NJDOP and then to line 19 of the NJ return.