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).
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
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information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
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