August 17, 2023
With so many people selling their homes lately and having questions, we have compiled some important information below.
Selling Your Home? The Tax Basics. What you should know.
You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:
- Owned the home for at least two years (the ownership test)
- Lived in the home as your main home for at least two years (the use test)
Gains and Losses
If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases). You cannot deduct a loss from the sale of a home.
Reporting the Sale
If you receive an informational income-reporting document such as Form 1099-S, Proceeds from Real Estate Transactions, you must report the sale of the home even if the gain from the sale is excludable. Additionally, you must report the sale of the home if you can’t exclude all your capital gain from income.
More Than One Home
If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
Example One. You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.
Example Two. You own a house, but you live in another house that you rent. The rented house is your main home.
Contact Us
If you have any questions related to the sale of your home, please call our office. We are happy to discuss your options.
