From the IRS---

When selling your home, you may be able to exclude all or part of any gain from the sale from your income. Here are some things that you should think about when selling your home:

Gains

If you have gain on the sale of your main home, you may be able to exclude up to $250,000 of that gain from your income. If you are married, the exclusion increases to $500,000.

Ownership and Use

To claim the exclusion, you must meet ownership and use tests. You must have owned and lived in the home as your main home (primary residence) for at least 2 years of the 5 year period ending on the date of the sale.

Losses

You may experience a loss when your main home sells for less than what you paid for it. This loss is NOT deductible.

Multiple Homes

If you own more than one home, you can only exclude the gain on the sale of your MAIN (primary) home. You must pay taxes on the gain from selling any other home.

Reported Sale

Those who don’t qualify to exclude all of the taxable gain from their income must report the gain when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return as well. Also, taxpayers who receive Form 1099-S (Proceeds from Real Estate Transactions) must report the sale on their tax return even if they have no taxable gain.

Mortgage Debt

Generally, taxpayers must report forgiven or cancelled debt as income on their tax return. This includes people who had a mortgage workout, foreclosure, or other cancelled mortgage debt on their home. Taxpayers who had debt discharged after 12/31/2017 cannot exclude it from income as qualified principal residence indebtedness unless a written agreement for the debt forgiveness was in place before 1/1/2018.

Possible Exceptions

There are exceptions to these rules for some taxpayers, including persons with a disability, certain members of the military, intelligence community and Peace corps workers.

Worksheets

The IRS has worksheets included in Publication 523 that can help you figure the adjusted basis of the home sold, the gain or loss on the sale, and the excluded gain on the sale.

The CPAs at Bergamo Tax can assist you if you have questions about a home sale. Just ask us!