How to Calculate and Report Gain or Loss From Selling Your Home

There are three most important tax questions you should ask yourself if you sold your home:

Do I qualify for the $250, 000 or $500,000 gain exclusion from my home sale?

Do I have to report gain or loss from my home sale?

How do I calculate and report gain or loss from the home sale?

Here are the answers to these questions.

Determine whether your home sale qualifies for maximum exclusion

Per IRS tax code, you can exclude up to $250,000 gain or $500,000 for married filing jointly on the sale of your home if:

1. You owned the home as your main residence for at least 24 months of the last 5 years before the date of sale.
2. You did not purchase the home through a like-kind exchange during the past 5 years.
3. You are not subject to expatriate tax.
4. You did not claim any exclusion during the past 2 years before the sale.

If you do not meet the above requirements, you may still be eligible for partial exclusion if you sold your home for work related move, health reasons or unforeseeable events. See Publication 523 for details.

Determine whether you need to report the gain or loss

You will need to report the gain or loss from your home sale if any of the following applies to you:

1. Your gain is over the exclusion of $250,000 or $500,000 for married filing jointly. 
2. You received Form 1099-S. ( You will need to report the sale even you have no gain.)
3. You have gain that is not qualified to be excluded.

Figure out the gain or loss from selling your home

Step 1: Collect information for calculating gain or loss from your home sale.

Your gain (or loss) is the difference between the amount you realized from home sale and the tax basis of your home.

To figure out the amount realized from sale of your home, you need:

     1. Form1099-S or real estate transaction documents for your home sale.

     2. Document or receipts for any selling expenses related to your home sale.

To figure out the tax basis of your home, you need:

     3. Settlement (or closing) statement for your home purchase.

     4. Document or receipts for any home improvement.

Step 2: Figure out the amount realized from the sale.

Input the information you collected from Step 1, Item 1 and 2 to the worksheet below to figure out the amount realized from the sale. If an item on the worksheet does not apply to you, leave it blank.

Step 3: Figure out tax basis of your home.

Input the information you collected from Step 1, item 3 and 4 to the worksheet below to figure out the tax basis of your home. If an item on the worksheet does not apply to you, leave it blank.

Step 4: Calculate gain or loss from the sale.

Report gain or loss from the sale

Report the sale on Form 8949, Sales and Other Dispositions of Capital Assets and Schedule D, Capital Gains and Losses of Form 1040.

If you owned your home for less than one year, report the sale on Part I.

If you owned your home for more than one year, report the sale on Part II.

For more information, please see IRS Publication 523 and 530.

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