Homeowners may qualify to exclude from their income all or part of any gain
from the sale of their main home.
Below are tips to keep in mind when selling a home:
Ownership and Use.
To claim the exclusion, the homeowner must meet the ownership and use tests.
This means that during the five-year period ending on the date of the sale, the
homeowner must have:
- Owned the home for at
least two years
- Lived in the home as their
main home for at least two years Gain. If there is a
gain from the sale of their main home, the homeowner may be able to
exclude up to $250,000 of the gain from income or $500,000 on a joint
return in most cases. Homeowners who can exclude all of the gain do not
need to report the sale on their tax return
Loss.
A main home that sells for lower than purchased is not deductible.
Reporting a Sale.
Reporting the sale of a home on a tax return is required if all or part of the
gain is not excludable. A sale must also be reported on a tax return if the
taxpayer chooses not to claim the exclusion or receives a Form
1099-S, Proceeds from Real Estate Transactions.
Possible Exceptions.
There are exceptions to the rules above for persons with a disability, certain
members of the military, intelligence community and Peace Corps workers, among
others. More information is available in Publication
523, Selling Your Home.
Worksheets.
Worksheets are included in Publication 523, Selling Your Home, to help you
figure the:
- Adjusted basis of the
home sold
- Gain (or loss) on the
sale
- Gain that can be
excluded
Items to Keep In
Mind:
- Taxpayers who own more
than one home can only exclude the gain on the sale of their main home.
Taxes must paid on the gain from selling any other home.
- Taxpayers who used the first-time
homebuyer credit to purchase their home have special rules that apply
to the sale. For more on those rules, see Publication
523. Use the First Time Homebuyer Credit Account
Look-up to get account information such as the total amount of your
credit or your repayment amount.
- Work-related moving
expenses might be deductible, see Publication
521, Moving Expenses.
- Taxpayers moving after
the sale of their home should update their address with the IRS and the
U.S. Postal Service by filing Form
8822, Change of Address.
- Taxpayers who purchased
health coverage through the Health
Insurance Marketplace should notify the Marketplace when moving out of
the area covered by the current Marketplace plan.
Avoid scams.
The IRS does not initiate contact using social media or text message. The first
contact normally comes in the mail. Those wondering if they owe money to the
IRS can view
their tax account information on IRS.gov to find out.
Additional Resources:
- Tax
Topic 701, Sale of Your Home
- Tax
Topic 703, Basis of Assets
- Tax Topic 611, Repayment of the First-Time Homebuyer Credit
- IRS Tax Map, Selling Your Home
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