IMPORTANT TAX REMINDERS FOR PEOPLE SELLING A HOME
Taxpayers who are selling their home may qualify to exclude all or a portion of the gain from their income when filing their tax return. Here are some considerations for homeowners when selling a home:
OWNERSHIP AND USE:
To claim the exclusion, the taxpayer must meet ownership and use tests. During a 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 and have a gain from the sale 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 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, gains 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 on their home. Taxpayers who had debt discharged, in whole or in part, on a qualified principal residence can’t exclude it 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.
This document is designed for general information only. The information presented on this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
For more information on this and a host of other topics, please contact Kevin via the channels listed below:
📧kevin@kmckernan.com or 📞718-317-5007