If you sold your main home during the tax year, you'll report the transaction using the Sale of Main Home Worksheet. The worksheet helps determine:
- Whether you have a gain from the sale
- Whether that gain qualifies for the home sale exclusion
- How much of the gain, if any, is taxable
To enter the sale in the program, go to:
- Federal
- Income (Select My Forms)
- Investments
- Sale of Main Home Worksheet
The program will walk you through the information needed to calculate your gain and apply any available exclusion.
Can I Exclude the Gain From the Sale of My Home?
Many homeowners can exclude some or all of their gain from income if they meet the IRS requirements.
Maximum Home Sale Exclusion
You may qualify for the maximum exclusion if you meet both of these tests:
Ownership and Use Test
You must have:
- Owned the home, and
- Used it as your main home
for a total of at least 2 years during the 5-year period ending on the date of sale.
The two years do not need to be continuous.
Prior Exclusion Rule
You generally cannot claim the exclusion if you excluded gain from the sale of another home during the 2-year period before the sale of your current home.
Exclusion Limits
If you qualify, you may exclude up to:
- $250,000 of gain if filing as Single, Head of Household, or Married Filing Separately
- $500,000 of gain for many Married Filing Jointly taxpayers who meet the applicable requirements
What If I Don't Meet the Full Two-Year Requirement?
You may still qualify for a reduced home sale exclusion if the primary reason for the sale was due to:
- A change in employment
- Health-related reasons
- Certain unforeseen circumstances recognized by the IRS
The reduced exclusion is generally based on the portion of the two-year ownership and use requirement that you satisfied before the sale.
What Adjustments Should I Include on the Sale of Main Home Worksheet?
The worksheet includes several adjustment categories that may increase your basis or reduce your taxable gain.
Purchase-Related Costs That May Increase Basis
Certain costs paid when you purchased the home may be added to your basis, including:
- Attorney or legal fees related to the purchase
- Property surveys
- Owner's title insurance
- Seller obligations you agreed to pay at closing
- Abstract fees
- Recording fees
- Transfer taxes
- Documentary stamp taxes
- Other qualifying acquisition costs
Increasing your basis generally reduces your taxable gain.
Selling Expenses
Selling costs can reduce the amount realized on the sale and may lower your gain.
Common examples include:
- Real estate commissions
- Attorney fees related to the sale
- Advertising costs
- Listing and marketing expenses
Home Improvements
Capital improvements that added value to the home or extended its useful life can usually increase your basis.
Examples include:
- Room additions
- New roofing
- HVAC system replacements
- Kitchen remodels
- Bathroom renovations
- Major structural improvements
Routine repairs and maintenance generally do not increase basis.
Local Improvement Assessments
Assessments for permanent improvements benefiting your property may also increase basis, such as:
- Sidewalk installations
- Street improvements
- Sewer or utility connection assessments
Other Basis Increases
Additional items that may increase basis include:
- Impact fees
- Utility connection fees
- Certain unreimbursed restoration costs following casualty events
Items That Can Decrease Basis
Some prior tax benefits may reduce your basis, which can increase your gain when the home is sold.
Examples include:
- Casualty loss deductions previously claimed
- Insurance reimbursements
- Certain residential energy-related credits
- Other basis adjustments required by IRS rules
Can I Deduct a Loss on the Sale of My Main Home?
No. The IRS does not allow a deduction for a loss on the sale of a personal residence.
Even if:
- You sold the home for less than you paid for it, or
- You do not qualify for the home sale exclusion,
any loss on the sale of your personal-use home is considered a nondeductible personal loss and cannot be claimed on your federal tax return.