0October 16, 2011
Before you sell your home make sure you understand the possible tax consequences:
- You can exclude the gain from the sale of your home on your taxes if you used your home as your main residence two years out of the past 5 years from the date of sale, but only if you did not already exclude a gain from the sale another home during the past 2 years from the date of sale. You must pay taxes on the gain on one of the homes.
- If you do have gain from the sale of your home you may be able to exclude up to 250,000 worth of gain (or 500,000 for joint filers). If you can exclude all the gain you don’t have to report anything on your return, otherwise you have to count as a capital gain on Form 1040, Schedule D. For assistance in determining the cost basis for your home and thus your gain (or loss) see IRS Publication 523, “Selling Your Home”.
- Unfortunately, you cannot deduct a loss on the sale of your home from your taxes.
- If you used the first-time homebuyer credit and you are no longer using the home as your primary residence (within 36 months) then you have to repay the tax credit during the tax year that the home ceased to be your primary residence. Please see IRS Form 5405, “First-Time Homebuyer Credit and Repayment of the Credit”.