Income Tax Deductions
Selling Your Home

Also see our FAQs on Selling Your Home

If you sell your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years. You cannot deduct a loss from the sale of your main home.

Ownership and Use Tests

To be eligible for this exclusion, your home must have been owned by you and used as your main home for a period of at least two out of the five years prior to its sale. The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use. Longer breaks, such as a one-year sabbatical, do not.

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. However, both of you would have to meet the use test to claim the $500,000 maximum amount.

If you can exclude all the gain from the sale of your home, you do not report any of that gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, use Schedule D, Capital Gains or Losses, on Form 1040 to report it.

Exceptions to Ownership and Use Tests

If you do not meet these ownership and use tests, or if during the two-year period ending on the date of the sale or exchange you sold or exchanged another home at a gain and excluded all or part of that gain, you may be allowed to exclude a portion of the gain realized on the sale or exchange of your home if you sold your home due to health, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disaster resulting in a casualty to your home, or an involuntary conversion of your home.

If you were on qualified extended duty in the U.S. Armed Services or the Foreign Service you may suspend the five-year test period for up to 10 years. You are on qualified extended duty when, for more than 90 days or for an infinite period, you are at a duty station that is at least 50 miles from the residence sold, or residing under orders in government housing.

Installment Sales

If you sell your home under a contract that provides for part or all of the selling price to be paid in a later year, you made an "installment sale." If you finance the buyer's purchase of your home yourself, instead of having the buyer obtain a loan or mortgage from a bank, you probably have an installment sale. See IRS Publication 537: Installment Sales for details in this situation.

For more information on the tax rules that apply when you sell your main home, see IRS Publication 523: Selling Your Home (PDF 192kb).

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