You can exclude from gross income any discharge of qualified principal residence indebtedness. This exclusion applies to discharges made after 2006 and before 2013. Additionally, the basis of the principal residence (main home) must be reduced (but not below zero) by the amount excluded from gross income. For more information, see Discharges of qualified principal residence indebtedness, later, and Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).

If you are an unmarried widow or widower on the date of sale, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. For more information, see Sale of main home by surviving spouse under Married Persons, later.

If you or your spouse is an employee, enrolled volunteer, or volunteer leader of the Peace Corps, you may be able to exclude from income a gain from selling your main home, even if you did not live in it for 2 years during the 5-year period ending on the date of sale. Generally, you can elect to have the 5-year test period for ownership and use suspended (maximum of 10 years) during any period you or your spouse serves outside the United States (on qualified official extended duty if an employee). This provision applies to a sale of a main home after December 31, 2007, and is now included under a special rule that already allows similar benefits to members of the uniformed services or Foreign Service, or employees of the intelligence community. For more information, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps under Exceptions to Ownership and Use Tests, later.

The option to deduct state and local general sales taxes instead of state and local income taxes was extended through 2009. See the instructions for Schedule A (Form 1040), line 5.

Beginning with sales or exchanges of your main home after December 31, 2008, many of the rules discussed in Business Use or Rental of Home, later, will not apply. You will no longer be able to exclude gain allocated to periods of nonqualified use of the property. For information, see Publication 553, Highlights of 2008 Tax Changes.

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.)

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.

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.

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 2008, 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 complete 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. However, you may need to report it. See Reporting the Sale, later.

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.

Near the end of this publication you will find 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. If you do not qualify for the maximum exclusion, use Worksheet 3 to figure your reduced maximum exclusion.

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.

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

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 
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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.

Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.

 
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If you have a tax question, check the information available on www.irs.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.

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

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.

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.

You buy a piece of land and move your main home to it. Then, you sell the land on which your main home was located. This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the 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 separate 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 a main home have been satisfied with respect to the vacant land.

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.

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.

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.

You own a house, but you live in another house that you rent. The rented house is your 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 of which you are a member.

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.