Home Sale Worksheet Link should be blank. Assets with disposition losses cannot be linked to the Home Sale Worksheet. How do I fix this?

Forum|Forum|5 years ago
March 22, 2021
2 replies
0 views

I have sold my rental property that I kept for 2 years and lived in for 3, so it falls under the 500k married tax exemption, everything works fine. But when I run the TurboTax check it tells me that I cannot link my Home Sales worksheet. If I unlink my home sales worksheet then my taxes owed increase, I think it takes away my 500k exemption. What should I do

DianeW777

If the home is currently set up as a rental on your return at the time of sale, then you need to complete the sale in the rental asset or assets.

You will need to answer "No" to Special Handling to answer the questions about using it as a home On the next screen you will be asked 'Was this asset included in the sale of your main home?'. Select Yes and then follow the screens to finish the reporting of your home/rental sale.

TurboTax will allocate the proper taxable amount due to the depreciation from the gain on the sale, only gain that exceeds this will be eligible for the exclusion. You will not see 100% of the gain excluded, even if the total gain is below $500,000 for married taxpayers.

See the images below as well as the comments from @Carl and @Critter-3.

[Edited: 03/23/2021 | 8:35a]

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Critter-3

If the gain is less than the depreciation taken then you don't have any gain to exclude as the depreciation recapture that is taxable cannot be excluded. Review the form 4797 & the Sch D for this information.

Here is the general formula ...

Adjusted basis = Original Cost + improvements + cost to purchase and sell

Sales price - adjusted basis = profit or loss

Profit - depreciation taken = capital gain which may be excluded

Depreciation taken cannot be excluded and that portion of the profit must be recaptured at a rate no more than 25%.

rdillard1

I'll chime in here. I received a call from customer who sold rental property who received this error. Diagnostic reveals the error on the schedule e worksheet which was linked to the Home Sale Worksheet. The property sold was a business property and not customer's home. I took customer into the sale of home section of the interview and deleted the sale of home reporting section which was completed in error.

After deleting the home sale entry for the same asset (business property sold), the error cleared.