If you are looking to sell your home, there are several tax rules that you should be aware of. Generally, the IRS treats a gain or loss from the sale of your home differently than it treats a gain or loss from the sale of other property or assets.
Publication 523 from the IRS explains many of these rules in detail and at great length. However, the IRS recently published a more concise list of its “Top Ten Tax Facts if You Sell Your Home”, as follows:
- If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used your home as your primary residence for at least two out of the five years before the date of sale.
- There are exceptions to the ownership and use rules. Some exceptions apply to personal with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details see Publication 523, Selling your Home.
- The most gain you can exclude is $250,000.00. This limit is $500,000.00 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
- If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
- You must report the sale on your tax return if you can’t exclude all or part of the gain. However, you must do so if you receive a Form 1099-S, Proceeds From Real Estate Transactions.
If you report the sale you should review the Questions and Answers on the Net Investment Income Tax page on IRS.gov.
- Generally, you can exclude the gain from the sale of your main home only once every two years.
- If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home is the home that you live in most of the time.
- If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.
- If you sell your main home at a loss, you can’t deduct it.
- After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, to do this.
For more information on these tax rules, see IRS Publication 523 on IRS.gov or call 800-TAX-FORM (800-829-3676) to get a copy by mail.
As every home sale and situation is unique, you should contact your tax preparer to see how these rules apply to you or with your specific tax questions regarding the sale of your home.