​Selling Your Home? Here’s the Tax Stuff You Should Know

​Selling Your Home? Here’s the Tax Stuff You Should Know

06/15/2022 Tags: Announcements, In the News


The housing market is pretty spicy in a lot of areas of the country. So, if you’re selling a home right now, here are four tax tips to keep in mind.

1. “Principal residence exclusion” — If you make a profit on your home’s sale, you might be able to exclude part or all of it from your income. It’s called a "principal residence exclusion.” To qualify, you’ll need to meet a couple of tests: “Ownership” and “Use.”

  • Ownership test. You’ll need to have owned your home for two of the past five years that end on the date of the sale of your house.
  • Use test —You’ll need to have used your home as your main residence for two of the past five years that end on the date of the sale of your house.

A couple of other exclusions to keep in mind: The principal residence exclusion is limited to $250,000 if you’re a single filer, $500,000 for joint filers. Also, you can only claim the exclusion once during a two-year period.

But wait! There’s more!

If you can’t meet the two-out-of-five-year tests, you might still be able to claim a partial primary residence exclusion. For that to work, you’ll need to have sold your home because:

  • Your workplace changed.
  • You had a health issue.
  • There was some other unforeseeable event.

If you can exclude all the profit you made on the sale, you don’t have to report it on your tax return unless you received a Form 1099-S, Proceeds from Real Estate Transactions. But if you can’t exclude all the profit you made from the sale, you have to report that gain on your taxes.

2. Selling your home at a loss — If you sold your home at a loss, the news is extra bad: You can’t deduct the loss.

What you can do is use the IRS’s worksheets to figure out the adjusted basis of your home, the gain or loss on the sale, and the amount of gain on the sale that you can exclude from your income.

3. Multiple homes — Do you have more than one home? Then you can only exclude any gain when you sell your main residence.

But let’s say you sell your main home, move into your vacation home, and turn it into your primary residence. Then, once you satisfy the ownership and use tests, you can exclude the profits if you sell that house.

4. “Short sale” — But what if you have to sell your home for less than you owe on your mortgage? If that’s the case, you can exclude the amount that was discharged or forgiven if:

  • The amount was discharged before Jan. 1, 2026, or
  • There’s a written agreement for the debt forgiveness in place before Jan. 1, 2026.

Other tax questions about selling your home? Let us know.



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