Selling   Your Home

Taxmap/pubs/p523-000.htm#TXMP2f584229 What's New

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Home acquired in like-kind exchange.

You cannot exclude from income a gain from selling your main home after October 22, 2004, if you acquired the home in a like-kind exchange and sold it during the 5-year period beginning with the date you acquired the home. For more information, see Special Situations, later.

Taxmap/pubs/p523-000.htm#TXMP078adca7 Reminders

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Change of address.

If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Mail it to the Internal Revenue Service Center for your old address. (Addresses for the Service Centers are on the back of the form.)

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Home sold with undeducted points.

If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of sale. See Points in Part I of Publication 936, Home Mortgage Interest Deduction.

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Photographs of missing children.

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication explains the tax rules that apply when you sell your main home. Generally, your main home is the one in which you live most of the time.

If you sold your main home in 2004, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). See Excluding the Gain, later. If you can exclude all of the gain, you do not need to report the sale on your tax return.

If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040). You may also have to include Form 4797, Sales of Business Property. See Reporting the Sale, later.

If you have a loss on the sale, you cannot deduct it on your return.

The main topics in this publication are:

• Figuring gain or loss,
• Basis,
• Excluding the gain,
• Ownership and use tests, and
• Reporting the sale.

Other topics include:

• Business use or rental of home,
• Deducting taxes in the year of sale, and
• Recapturing a federal mortgage subsidy.

Taxmap/pubs/p523-000.htm#TXMP419f5761 Worksheets.

This publication includes worksheets you can use to figure your gain (or loss) and your exclusion. Use Worksheet 1 to figure the adjusted basis of the home you sold. Use Worksheet 2 to figure the gain (or loss), the exclusion, and the taxable gain (if any) on the sale. In some situations, you may also need to use Worksheet 3 to figure a reduced maximum exclusion.

Taxmap/pubs/p523-000.htm#TXMP1aecaf23 Sale before May 7, 1997.

If you sold your main home before May 7, 1997, and postponed the gain while serving in the Armed Forces, see Publication 3, Armed Forces' Tax Guide, for special rules that are not covered in this publication.

Taxmap/pubs/p523-000.htm#TXMP566770fb Date of sale.

If you received a Form 1099-S, Proceeds From Real Estate Transactions, the date of sale should be shown in box 1. If you did not receive this form, the date of sale is the earlier of (a) the date title transferred or (b) the date the economic burdens and benefits of ownership shifted to the buyer. In most cases, these dates are the same.

Taxmap/pubs/p523-000.htm#TXMP6d2d6bb2 What is not covered in this publication.

This publication does not cover the sale of rental property, second homes, or vacation homes. For information on how to report those sales, see Publication 544, Sales and Other Dispositions of Assets.

Taxmap/pubs/p523-000.htm#TXMP51236875 Comments and suggestions.

We welcome your comments about this publication and your suggestions for future editions.

You can write to us at the following address:

 
Internal Revenue Service  
Individual Forms and Publications Branch  
SE:W:CAR:MP:T:I  
1111 Constitution Ave. NW, IR-6406  
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Taxmap/pubs/p523-000.htm#TXMP75ba833d Tax questions.

If you have a tax question, visit www.irs.gov or call 1-800-829-1040. We cannot answer tax questions at either of the addresses listed above.

Taxmap/pubs/p523-000.htm#TXMP0c15e625 Ordering forms and publications.

Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to one of the three addresses shown under How To Get Tax Help in the back of this publication.

Useful items

You may want to see:

See How To Get Tax Help, near the end of this publication, for information about getting these publications and forms.

Taxmap/pubs/p523-000.htm#TXMP20cd83e1 Main Home

Main Home

This section explains the term "main home." Usually, the home you live in most of the time is your main home and can be a:

• House,
• Houseboat,
• Mobile home,
• Cooperative apartment, or
• Condominium.

To exclude gain under the rules in this publication, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale.

Taxmap/pubs/p523-000.htm#TXMP2e5df9e9 Land.

If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land.

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Example.

On March 4, 2004, you sell the land on which your main home is located. You buy another piece of land and move your house to it. This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land.

Taxmap/pubs/p523-000.htm#TXMP695eef0f Vacant land.

The sale of vacant land is not a sale of your main home unless:

• The vacant land is adjacent to land containing your home,
• You owned and used the vacant land as part of your main home,
• The sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and
• The other requirements for excluding gain from the sale of the vacant land have been satisfied.

If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. See Excluding the Gain, later.

Taxmap/pubs/p523-000.htm#TXMP1b1d80f6 More than one home.

If you have more than one home, you can exclude gain only from the sale of your main home. You must include in income gain from the sale of any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

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Example 1.

You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home.

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Example 2.

You own a house, but you live in another house that you rent. The rented house is your main home.

Taxmap/pubs/p523-000.htm#TXMP1239d305 Factors used to determine main home.

In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Those factors include the following.

1. Your place of employment.
2. The location of your family members' main home.
3. Your mailing address for bills and correspondence.
4. The address listed on your:
   1. Federal and state tax returns,
   2. Driver's license,
   3. Car registration, and
   4. Voter registration card.
5. The location of the banks you use.
6. The location of recreational clubs and religious organizations you are a member of.

Taxmap/pubs/p523-000.htm#TXMP0d50903c Property used partly as your main home.

If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. For details, see Business Use or Rental of Home, later.

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