Sale of Main home and rental (used to be main) on same year

Forum|Forum|1 year ago
March 30, 2025
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1- How to report sale of two homes in same year?

2- Do I qualify for capital gain exclusion on both sales?

Situation:

married filling jointly both owned both homes.

Home 1: Was primary residence, both lived there 2 of last 5 yrs and owned more than 2 yrs. Converted to rental, rented for about a year and sold at beginning of 2024. There was capital gain. Received form 1099-S

Home 2: Main home after previous home (1), lived there less than 2 yrs, sold it mid year due to change in jobs (more than 50 miles, different state). So about 4 months between sale of previous home. There is also capital gains. Received form 1099-S.

KrisD15

2. If Married Filing Jointly, you will be limited to taking the Exclusion of Capital Gain on only one house.

If Married Filing Separately, it would be possible for you each to take an Exclusion of Capital Gain on one of the homes, however the exclusion would only apply to the gain for that Taxpayer. If you each were 50% owners, the exclusion would only apply to 50% of the gain for each separate spouse on the house sale they claimed. In addition, Home two would only be eligible for a partial exclusion since it was lived in less than two years.

It would depend on percentage of ownership and the amount of the gain for each house, but most likely filing Jointly and claiming one sale would be more advantageous. (If Home 2 was sold in 2024 and Home 1 in 2025, the exclusion of gain would be taken for tax year 2025)

PLEASE NOTE, THE SALE OF HOME 1 will involve depreciation recapture whether the exclusion to capital gains applies or not. Depreciation recapture is treated as ordinary income and taxed at your regular tax rate. Since it was only rented one year, the recapture will be small, yet still needs to be considered.

"Converted to rental, rented for about a year and sold at beginning of 2025."

1- How to report sale of two homes in same year?

Which tax year, 2025 or 2024?

Were both homes sold in 2024 or 2025, or different years?

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Jren25Author

@KrisD15 Both homes were sold in 2024 (sorry for confusion, I have edited original post). One around Jan and the other around July. Both have similar capital gains, home 1 about 90K home 2 about 120K. I thought second home would also qualify for deduction since it was sold due to job change.
In TT if I enter both homes in sale of main home section and for the second home I enter the information it seems to also take the deduction. Then when I work on the disposition of the asset questionary it asks me if I want to work on the Home sale worksheet for the sale of the rental and ask which of the 2. Then I select the rental and it just seems to modify the worksheet by asking me to allocate land and actual home. So, two follow up questions:

3- is this the correct way to enter the information (especially for the rental)

4- are you sure both homes don’t qualify for exclusion since second home was sold due to special circumstances (changing job)? TT seems to suggest they do, unless I’m entering info incorrectly. Also I have seen other posts that suggest a second home would qualify under special circumstances like this one.
appreciate clarification. Thanks in advance

Jren25Author

@KrisD15 forgot to answer about the ownership. Yes both are 50% on both homes. Follow up question.
5- if we were to go the filling separate route, how do we report the sale of the rental in that case? Do we just divide everything by two? What about the sale of assets reporting?

6- what about other rentals (we have 2 more) TT has been tracking under joint return? Do we just split all by 2 and split the tracking? Thanks