Be tax savvy when selling your home. Many people sell their homes at this time of year and move over the summer months to be sure and get their kids into school at a new location by September. Many retirees also sell and move over the Summer because it easier when the weather is clement. Whatever your strategy, be aware you may qualify to exclude all or part of any gain from the sale of a home from your income when filing your tax return. Keep these tips in mind:
Ownership and use: 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.
Gains: 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.
Losses: Some taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.
Multiple homes: 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.
Reported sale: 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. Anyone who chooses not to claim the exclusion must report the taxable gain on 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.
Mortgage debt: 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 can’t 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.
Contact Us: The tax team at Fuoco Group and TFG can help you navigate the complex tax requirements associated with properties of all types. We can minimize your property tax exposure, manage your tax compliance, and look for available exemptions. Whether for your personal needs or business needs, we are here for you. Need a fixed asset review or a property reclassified? We’ve got you covered. Reach out toll free: 855-542-7537, or cpa@fuoco.com.