Tax Tips for Individuals Selling Their Home

If you sell your main home
and realize a gain from the sale, you may qualify to exclude all or
part of that gain from your income. The following ten tips will
help when selling your home.

1. In general, you are eligible to exclude the gain from income
if you have owned and used your home as your main home for two out
of the five years prior to the date of its sale.
2. 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).
3. You are not eligible for the exclusion if you excluded the gain
from the sale of another home during the two-year period prior to
the sale of your home.
4. If you can exclude all of the gain, you do not need to report
the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You
must report it on Form 1040, Schedule D, Capital Gains and
Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home,
to help you figure the adjusted basis of the home you sold, the
gain (or loss) on the sale, and the gain that you can
exclude.
8. If you have more than one home, you can exclude a 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.
9. If you received the First-Time Homebuyer Credit and, within 36
months of the date of purchase, the property is no longer used as
your principal residence, you are required to repay the credit.
Repayment of the full credit is due with the income tax return for
the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and
Repayment of the Credit. The full amount of the credit is
reflected as additional tax on that year’s tax return.
10. When you move, be sure to update your address with the IRS and
the U.S. Postal Service to ensure you receive refunds or
correspondence from the IRS. Use From 8822, Change of Address, to
notify the IRS of your address change.

For more information about selling your home, see IRS Pub
523, Selling Your Home.