Capital Gain on Home Sale

The question is asked because the requirement is that you live in the home for at least two years in the 5 year period on the date of sale.  Just answer Yes to the question.

If you sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

If you had a gain greater then the exclusion amounts then you would have to report the sale. Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported. You will need the online TurboTax Premier or Self-Employed edition to report the sale if you are using the online editions. Make sure that you indicate that you want the sale of the home reported on your tax return.

The rule for excluding the capital gain on the sale of your main home says that you must have lived in the home for at least 2 years of the previous 5 years from the date of the sale (as stated by DoninGA).

TurboTax asks you that question by subtracting 5 years from the date the house was sold and then asks if you lived in the home for at least 24 months after that date.  So, as long as you lived in it for 24 months after the date you purchased it (which is after the date that TurboTax is asking about), you would answer 'yes'.  

Take a look at the following TurboTax help article if you would like to learn more:

Is the money I made from a home sale taxable?

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