Selling Your Home?

Important tax reminders for people selling a home.

The National Association of Realtors® reported that home sales exceeded 5 million nationwide during the month of April 2022. A lot of families move during the summer. If you are selling your home, you may qualify to exclude all or part of any gain from the sale from your income when filing your tax return.

Here are some important tax reminders you should think about when selling your home:

Ownership and Use

To claim the exclusion, you must meet ownership and use tests. During a five-year period ending on the date of the sale, you must have owned the home and lived in it as your main home for at least two years.

Gains

If you sell your main home and have a gain from the sale, you may be able to exclude up to $250,000 of that gain from your income. Taxpayers who file a joint return with their spouse may be able to exclude up to $500,000. Homeowners excluding all the gain do not need to report the sale on their tax return unless a Form 1099-S was issued.

Losses

If your main home sells for less than what you paid for it, this loss is not deductible.

Multiple Homes

If you own more than one home, you can only exclude the gain on the sale of your main home. You must pay taxes on the gain from selling any other home.

Reported Sale

If you do not qualify to exclude all of the taxable gain from your income, you must report the gain from the sale of your home when you file your tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return.

Taxpayers who receive Form 1099-S, Proceeds from Real Estate Transactions must report the sale on their tax return even if they have no taxable gain.

Mortgage Debt

Generally, taxpayers must report forgiven or canceled debt as income on their tax return. This includes people who had a mortgage workout, foreclosure, or other canceled mortgage debt on their home. If you had debt discharged, in whole or in part, on a qualified principal residence, you cannot exclude it from income unless it was discharged before January 1, 2026, or a written agreement for the debt forgiveness was in place before January 1, 2026.

Possible Exceptions

There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military, intelligence community, and Peace Corps workers.

A Final Note

Worksheets included in Publication 523, Selling Your Home can help you figure the adjusted basis of the home sold, the gain or loss on the sale, and the excluded gain on the sale.

You may also contact your tax professional for assistance or tax advice related to selling your home.

For the most recent copy of our newsletter or to subscribe, check out the Resources page on our website.