Introduction

This chapter explains the tax rules that apply when you sell your main home. Generally, your main home is the one in which you live most of the time.

Gain. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases). Any gain you cannot exclude is taxable.

Loss. You cannot deduct a loss from the sale of your main home.

Worksheets. Publication 523, Selling Your Home , includes worksheets to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the amount of the gain that you can exclude.

Reporting the sale. Do not report the sale of your main home on your tax return unless you have a gain and at least part of it is taxable. Report any taxable gain on Schedule D (Form 1040).

Who may need to read chapter 3 in Publication 523. Chapter 3 of Publication 523 explains the rules that applied to sales before May 7, 1997. Those rules may still apply to you if all three of the following statements are true.

1. You postponed the gain on the sale.
2. The 2-year period you had to replace that home (your replacement period) was suspended while you either:
   1. Served in the Armed Forces, or
   2. Lived and worked outside the United States.
3. You have not already reported to the IRS your purchase of a new home within your replacement period, or a taxable gain resulting from the end of your replacement period.

If these situations apply and you have questions, see Publication 523.

Publication
• 523 - Selling Your Home
• 530 - Tax Information for First-Time Homeowners

Form (and Instructions)
• Schedule D (Form 1040) - Capital Gains and Losses
• 8822 - Change of Address
• 8828 - Recapture of Federal Mortgage Subsidy

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