Tax Considerations When Selling a Home
Many people move during the summer. We see this in our CPA practice every year. Taxpayers who are selling their home may qualify to exclude all or part of any gain from the sale from their income when filing their tax return.
When selling a home or residence, homeowners should think about:
Ownership and use of a home or residence
To claim the exclusion, the taxpayer must meet ownership and use tests. During the five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.
Taxpayers who sell their main home for a capital gain may be able to exclude up to $250,000 of that gain from their income. Taxpayers who file a joint return with their spouse may be able to exclude up to $500,000. Homeowners excluding all the gain do not need to report the sale on their tax return unless a Form 1099-S was issued.
Some taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.
Taxpayers who own more than one home can exclude the gain only on the sale of their main home. They must pay taxes on the gain from selling any other home.
Taxpayers who don’t qualify to exclude all of the taxable gain from their income must report the gain from the sale of their home when they file their tax return. 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.
Generally, taxpayers must report forgiven or canceled debt as income on their tax return. This includes people who had a mortgage workout, foreclosure or other canceled mortgage debt on their home. Taxpayers who had debt discharged, in whole or in part on a qualified principal residence cannot exclude that debt from income unless it was discharged before January 1, 2026, or a written agreement for the debt forgiveness was in place before January 1, 2026.
There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military or intelligence community and Peace Corps workers.
For more information about the tax and accounting services we provide, including tax return preparation, tax debt relief and representation of taxpayers to the IRS and the state, visit our Home Page!
If you want our team to handle your tax and accounting matters for you, click here.
Massey and Company CPA is a boutique tax and accounting firm serving individuals and small businesses in Atlanta, Chicago and throughout the country. Our services include tax return preparation, tax planning for businesses and individuals, IRS tax problem resolution, IRS audits, and small business accounting and bookkeeping.
We are proud to be your CPA firm.