If you are planning on selling your home, you probably have some real estate tax questions. Regardless of whether you report a loss or a gain from the transaction, the sale of your main residential property may have an impact on your bottom line come tax season.
Do You Pass the Tests?
You must meet a strict set of criteria in order to exclude any gain from your taxes. You can exclude your gain from the sale of your home if you pass these tests:
Ownership Test – On the sale date, you must have owned the home for at least two of the last five years.
Use Test – On the sale date, you must have lived in the home for at least two of the last five years. If you, your spouse or your former spouse did not use the home as their main residential property during this period of time, it would be categorized as non-qualified use.
How much can you exclude?
Out of all of the real estate tax questions, this one is the most popular. You can exclude the income from the sale of your home if all of the following apply:
You have a gain of up to $250,000 if filing as an individual, and:
- You pass the ownership and use tests
- If you have not excluded gain from another property within the 2 year period
You have a gain of up to $500,000 if filing jointly with your spouse, and:
- Either you or your spouse pass the ownership test
- Both you and your spouse pass the use test
- If you have not excluded gain from your taxes on any other property within the two year period
How Do I Report the Sale of my Home?
If you end up having a gain on the sale of your house or if you experience a loss you most likely will need to report it on Form 8949.
In limited situations you do not need to disclose the sale of your home when filing taxes unless:
- You do not qualify to exclude the gain
- You wish not to exclude the gain for any reason
- You received From 1099-S
If you are unsure about what to report or not to report the sale of your home on your taxes, contact a professional accountant who can answer your real estate tax questions.
If you claimed the home office deduction and/or used your home as a rental property at any point during your ownership of the property special tax rules apply.
Real Estate Tax Questions Answered
Filing your taxes is already complicated enough, but selling your home can make it even more complicated. You can contact us at anytime to answer all of your real estate tax questions! We can be reached by phone at (925) 933-2626, email at email@example.com, or visiting our tax services website.