Important Reminders

Change of address.   If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Mail it to the Internal Revenue Service Center for your old address. (Addresses for the Service Centers are on the back of the form.)

Home sold with undeducted points.   If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of sale. See Points in Part I of Publication 936, Home Mortgage Interest Deduction.

Photographs of missing children.   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication 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 not excluded is taxable.

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

Worksheets.   Worksheets are included in this publication 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). You may also have to include Form 4797, Sales of Business Property. See Reporting the Gain in chapter 2.

Who may need to read chapter 3.   Chapter 3 of this publication explains the rules that applied to sales before May 7, 1997. You may still need to know those rules, but only if you sold your main home at a gain before May 7, 1997, and all three of the following statements are true.

1. You postponed the gain on the sale as described in chapter 3.
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, as described in chapter 3 under What To Report Now.

If all three statements are true or you have questions, see chapter 3.

Date of sale.   If you received a Form 1099-S, Proceeds From Real Estate Transactions, the date of sale should be shown in box 1. If you did not receive this form, the date of sale is the earlier of (a) the date title transferred or (b) the date the economic burdens and benefits of ownership shifted to the buyer. In most cases, these dates are the same.

What is not covered in this publication.   This publication does not cover the sale of rental property, second homes, or vacation homes. For information on how to report those sales, see Publication 544, Sales and Other Dispositions of Assets.

Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.

You can e-mail us while visiting our web site at www.irs.gov.

You can write to us at the following address:

Internal Revenue Service
Technical Publications Branch
W:CAR:MP:FP:P
1111 Constitution Ave. NW
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

Useful Items You may want to see:

Publication

• 521   Moving Expenses
• 527   Residential Rental Property
• 530   Tax Information for First-Time Homeowners
• 544   Sales and Other Dispositions of Assets
• 547   Casualties, Disasters, and Thefts
• 551   Basis of Assets
• 587   Business Use of Your Home
• 936   Home Mortgage Interest Deduction

Form (and Instructions)

• Schedule D (Form 1040)   Capital Gains and Losses
• 1040X   Amended U.S. Individual Income Tax Return
• 8822   Change of Address
• 8828   Recapture of Federal Mortgage Subsidy

See chapter 5 for information about getting these publications and forms.

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