How to account for homeowner capital gains exclusion for a rental property on Freetaxusa?
We sold a property that qualifies for a $250k capital gains tax exclusion. This property was a home for several years, after which it became a rental property.
- We have tracked the property's depreciation while we rented it, and we know that up to 25% of this depreciation will be recaptured.
- The property sold in 2023 and the homeowner tax exclusion should still apply.
However, I do not see a way to enter the sale of this rental property that also accounts for the homeowner tax exclusion on Freetaxusa. Have I missed it? Could you advise? Thanks.
Best Answer
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Unfortunately, our software does not support this exclusion when a home has been used as both a personal residence and also as a rental property. We do hope to be able to support the partial exclusion in future tax years, but for 2023 and previous tax years, we don't. I'm sorry for the inconvenience.
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[deleted]
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Thanks, I appreciate the answer.
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what about 2024?
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Hi abhirkmv,
Thank you for asking! Yes, starting for the 2024 tax year, we do support the partial exclusion of a home sale that was your main home, then converted to a rental before it was sold.
To report this in your account, go to Income > Rental Income (Schedule E). On the Depreciable Assets screen for your rental property, indicate the day the home was sold. When asked "What happened to your home?" select the option: "Sale is a rental that was also your home." Finish going through those screens to answer questions about the rental. On the last screen for your depreciable asset, you'll see this alert:
"Because you sold your home you'll need to report the sale of your home elsewhere on your tax return.
If this is your main home report the sale on the Home Sale screens in the Uncommon Income section of the software."
After you have finished going through the depreciable asset screens, go to Income > Uncommon Income > Sale of Main Home to enter information for the exclusion.
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