Getting taxed for selling my primary residence in Texas after divorce?!

I'm in a total mess right now with my taxes and need some serious advice. Here's what happened - I purchased a house with my now ex-husband back in 2021 for about $350,000 in Texas. Then in 2022, after only owning it for 10 months, we ended up going through a divorce and had to sell the place because neither of us could afford to keep it on our own after trying to refinance. The house sold for around $385,000, but after all the seller fees (about $31,000), we basically just broke even. I didn't think much about it until now doing my taxes. I tried using TurboTax to file myself, and it's saying I owe nearly $54,000 in taxes! I'm completely shocked and honestly don't know how I'm supposed to come up with that kind of money. During those 10 months, I had a newborn baby, went through a divorce, and had to sell my first home - all within like a 3-month period. I'm desperate for help understanding this. How can I possibly owe taxes when we barely broke even on the house? Is this because we didn't live there for 2 years? Is there anything I can do?

0 coins

20 comments

Demi Hall

•8M

I can help explain what's happening here. When you sell your primary residence, you normally don't have to pay taxes on gains up to $250,000 (single) or $500,000 (married filing jointly). However, there's a catch - you need to have owned and lived in the home as your main residence for at least 2 out of the 5 years before selling. Since you only owned the home for 10 months, you don't meet this requirement. That said, there are special exceptions for unforeseen circumstances like divorce, and you might qualify for a partial exclusion. This would prorate the $250,000 exclusion based on how long you lived there. Also, $54,000 in tax seems extremely high for the numbers you've shared. With a purchase price of $350,000 and selling price of $385,000, your gain would only be $35,000 before considering the selling costs of $31,000. After those costs, your actual gain would be around $4,000, which wouldn't result in such a large tax bill. I think there might be an error in how TurboTax is calculating your basis or gain. Make sure you've correctly entered all your purchase costs, selling costs, and any improvements you made to the home.

0 coins

Elliott luviBorBatman

•8M

Thank you so much for this explanation! I didn't know about the partial exclusion for divorce situations. I definitely need to go back and check my TurboTax entries because something must be wrong. I didn't make any major improvements to the house, just some minor repairs. I'm wondering - do I need to include specific IRS forms to claim this partial exclusion? And should I consider getting a tax professional to look at this instead of trying to do it myself?

0 coins

Demi Hall

•8M

You're right about improvements - any significant improvements would increase the basis and reduce any potential gain. Even small upgrades like replacing fixtures, painting, or landscaping can be added to the basis. For the partial exclusion, you'll need to file Form 2119 (Sale of Your Home) with your tax return. Given the complexity of your situation and the significant tax amount initially calculated, I would definitely recommend consulting with a tax professional. They can ensure you're claiming everything correctly and maximize any exceptions you're entitled to due to the divorce. Many tax pros offer consultations where they can identify issues without you committing to their full service.

0 coins

Kara Yoshida

•8M

After reading about your situation, I had something similar happen to me last year. I was totally confused about capital gains and home sales until I found taxr.ai (https://taxr.ai) which literally saved me thousands. I uploaded my closing documents from both the purchase and sale, and it automatically identified that TurboTax wasn't accounting for my selling costs correctly. The tool analyzed all my documents and showed exactly where my tax software was making calculation errors. In my case, TurboTax wasn't properly factoring in the real estate commission and other selling expenses which should have reduced my taxable gain. The tool also helped me identify the partial exclusion I qualified for due to unexpected circumstances (job change in my case, but divorce qualifies too).

0 coins

Kara Yoshida

•8M

The process is pretty straightforward - you upload your closing documents (HUD-1 or Closing Disclosure) from both the purchase and sale. The AI analyzes them to extract all the relevant information and calculates your correct tax basis and gain/loss. Your documents are encrypted and they explain they don't store them after analysis. Yes, it definitely handles divorce-related sales. That's actually one of the specialized situations they focus on because tax software often misses the partial exclusion rules. For your brother's situation with rental property, it can handle that too - it differentiates between personal residence periods and rental periods, which affects depreciation recapture and basis calculations.

0 coins

Philip Cowan

•8M

I came back to update after trying taxr.ai like mentioned above. I was skeptical initially (as you can see from my question), but I was desperate because TurboTax was showing I owed over $20k on my home sale this year. When I uploaded my documents to taxr.ai, it immediately flagged that I had entered my original purchase price incorrectly in TurboTax. Also, it showed that several of my closing costs from the purchase should have been added to my basis but weren't. The biggest issue was that TurboTax wasn't accounting for the partial exclusion I qualified for due to my job relocation. After fixing everything in TurboTax based on their report, my tax bill went from $20k down to just $1,800. Massive difference! If you're dealing with home sale tax issues, especially with special circumstances, it's definitely worth checking out.

0 coins

Lena Schultz

•8M

Just wanted to add something about contacting the IRS directly for guidance. I tried calling them for weeks about a similar capital gains issue with no luck. After the 10th time of being on hold for 2+ hours, I discovered Claimyr (https://claimyr.com) and watched their demo at https://youtu.be/_kiP6q8DX5c. The service actually got the IRS to call ME back within a day. I spoke with an IRS agent who confirmed I qualified for a partial exclusion due to "unforeseen circumstances" (which divorce definitely counts as). They guided me through exactly what documentation I needed and how to properly report everything. Saved me thousands in taxes I didn't actually owe and gave me peace of mind that I was filing correctly.

0 coins

Lena Schultz

•8M

It uses a combination of technology and timing to navigate the IRS phone system. Basically, they have an automated system that calls the IRS repeatedly using optimal timing algorithms until it gets through, then it holds your place in line and calls you when it's about to connect with an agent. I was super skeptical too! I thought exactly the same thing at first. But I was desperate after trying for weeks with no success. The service costs money, yes, but for me it was worth it considering the amount of taxes at stake and the stress of not knowing if I was filing correctly. The peace of mind from actually speaking to an IRS agent who confirmed my exclusion was valid was honestly priceless. They don't guarantee you'll like what the IRS tells you - they just guarantee you'll actually get to talk to them.

0 coins

Pedro Sawyer

•8M

I need to eat my words from my skeptical comment above. After struggling for weeks with my audit situation and seeing no progress, I reluctantly tried Claimyr. Within 24 hours, I got a call from an actual IRS agent who helped resolve my case. The agent explained that in my situation (similar to the original poster's with a home sale after divorce), I qualified for a partial exclusion of gain. They walked me through Form 2119 and exactly how to calculate my reduced exclusion amount based on the months I lived in the property. For anyone dealing with complex tax situations like home sales and divorce - being able to actually speak with the IRS and get official guidance is invaluable. Definitely worth it when you consider the alternative of potentially paying thousands in taxes you might not actually owe.

0 coins

Mae Bennett

•8M

Make sure to check if you're eligible for what's called a "partial exclusion" due to unforeseen circumstances. IRS Publication 523 specifically mentions divorce as a qualifying event. The calculation would be: (months you owned and lived in home ÷ 24) × $250,000 So if you lived there 10 months: (10 ÷ 24) × $250,000 = $104,166 exclusion With your gain being so small after seller costs, this partial exclusion would likely cover all of it, meaning zero tax owed. TurboTax probably isn't capturing this special circumstance correctly.

0 coins

Mae Bennett

•8M

In TurboTax, you need to look for the section about "home sale" or "sale of home" and there should be questions about how long you owned and used the home. When it asks why you sold before meeting the 2-year requirement, select "divorce" or "unforeseen circumstances." If you can't find this option, you might need to use the "form view" rather than the interview format. Look for Form 2119 in TurboTax. If you're still having trouble, the "Help" search function in TurboTax and searching for "partial exclusion" should guide you to the right section.

0 coins