Sale of Your Home

If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Publication 523, Selling Your Home, provides rules and worksheets.

In general, you are eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its sale. Generally, you are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Refer to Publication 523 for the complete eligibility requirements as well as exceptions to the two year rule.

Report the sale of your main home only if you have a gain that is not excluded from your income. In most cases, if you have a gain that is not excluded, you must report it on Form 1040 (Schedule D), Capital Gains and Losses.

If you or your spouse are on qualified official extended duty in the Uniformed Services, the Foreign Service, or the intelligence community, you may elect to suspend the five-year test period for up to 10 years. You are on qualified official extended duty if, for more than 90 days or for an indefinite period, you are:

• At a duty station that is at least 50 miles from your main home, or
• Residing under government orders in government housing.

If you sold your home under a contract that provides for all or part of the selling price to be paid in a later year, you made an "installment sale". If you have an installment sale, report the sale under the installment method unless you elect out. Refer to Tax Topic 705, Installment Sales, for more information.