Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home. Here are some tips to keep in mind when selling your home:
- Gain. If there is a gain from the sale of the 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 generally do not need to report the sale on their tax return.
- Loss. If a main home is sold at a loss, the loss 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, among others.
- 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
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 be 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.
- Work-related moving expenses might be deductible.
- Taxpayers should update their home 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.
If you are selling your home and need some advice on the tax implications of the sale, be sure to consult a Certified Public Accountant. Submitted by: Brian Walgamott, CPA, Director, Tax Services, Thomas Howell Ferguson P.A. CPAs, firstname.lastname@example.org, (850)668-8100.