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IRS.gov Website
Publication 523
taxmap/pubs/p523-004.htm#en_us_publink100011873

Reporting Your Home Sale(p18)

rule
Once you've done the calculations described in this publication, you are ready to report them on your tax returns. This section tells you how, and also gives you information such as how to take deductions relating to your home sale and how to report other types of income (besides your gain) you may have received because of your home sale.
This section also covers special circumstances that apply to some home sellers: recapturing depreciation and paying back a federal mortgage subsidy or first-time homebuyer credit.
Deposit
What records to keep. Any time you buy real estate, you should keep records to document the property's adjusted basis. In general, keep these records until 3 years after the due date for your tax return for the year in which you sold your home.
taxmap/pubs/p523-004.htm#en_us_publink100011875

Reporting Gain or Loss on Your Home Sale(p18)

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taxmap/pubs/p523-004.htm#en_us_publink100011876

Determine whether you need to report the gain from your home.(p18)

rule
You need to report the gain if ANY of the following is true.
If NONE of the three bullets above is true, you do not need to report your home sale on your tax return. If you did not make separate home and business calculations on your property, skip to Reporting Deductions Related to Your Home Sale, later.
If ANY of the three bullets above is true, skip to Determine whether your home sale is an installment sale, later.
taxmap/pubs/p523-004.htm#en_us_publink100011877
If you made separate gain/loss calculations for business and residence portions of your property,(p18)
you may have to use Form 4797 to report the sale of the business or rental part. See Business or Rental Use of Home, earlier.
taxmap/pubs/p523-004.htm#en_us_publink100011878

Determine whether your home sale is an installment sale.(p18)

rule
If you finance the buyer's purchase of your home (you hold a note, mortgage, or other financial agreement), you probably have an installment sale. You may be able to report any gain you cannot exclude on an installment basis. Use Form 6252, Installment Sale Income, to report the sale.
For more information, see Publication 537, Installment Sales.
taxmap/pubs/p523-004.htm#en_us_publink100025496

Report any interest you receive from the buyer.(p18)

rule
If the buyer is making payments to you over time (as when you provide seller financing), then you must generally report part of each payment as interest on your tax return. Report the interest as ordinary income on Form 1040, line 8a. If the buyer is using the property as a first or second home, also report the interest on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends, to Form 1040 and provide the buyer's name, address, and social security number. There is a $50 penalty per requirement for failing to meet any of these requirements.
taxmap/pubs/p523-004.htm#en_us_publink100025497
If either you or the buyer is a nonresident or resident alien who does not have and is not eligible to get a social security number,(p18)
an individual taxpayer identification number (ITIN) may be provided instead. If you do not have an ITIN, apply for one by filing Form W-7, Application for IRS Individual Taxpayer Identification Number.
taxmap/pubs/p523-004.htm#en_us_publink100011879

Complete Form 8949, Sales and Other Dispositions of Capital Assets.(p18)

rule
Use Form 8949 to report gain from the sale or disposition of the personal use portion of your home if you cannot exclude the gain.
Deposit
If you have gain that cannot be excluded, you generally must report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses. Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. For more information, see the Instructions for Form 8949.
taxmap/pubs/p523-004.htm#en_us_publink100011880

Complete Schedule D (Form 1040), Capital Gains and Losses.(p18)

rule
Using the information on Form 8949, report on Schedule D (Form 1040) the gain or loss on your home as a captial gain or loss. Follow the Instructions for Schedule D when completing the form. Note you will not be able to use Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, for your return.
If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. See Publication 505, Tax Withholding and Estimated Tax.
taxmap/pubs/p523-004.htm#en_us_publink100011882

Reporting Deductions Related to Your Home Sale(p19)

rule
If you are not itemizing deductions on your return for the year in which you sold your home, skip to Reporting Other Income Related to Your Home Sale, later.
Note there is no tax deduction for transfer taxes, stamp taxes, or other taxes, fees, and charges you paid when you sold your home. However, you can treat these taxes and fees as selling expenses as described in line 1 under How to Figure Your Gain or Loss Worksheet, earlier. If you pay these amounts as the buyer, include them in your cost basis of the property.
taxmap/pubs/p523-004.htm#en_us_publink100011887

Determine the amount of real estate tax deductions associated with your home sale.(p19)

rule
Follow the instructions under If you did not receive a Form 1099-S, later. If you are not itemizing deductions on your return for the year in which you sold your home, skip to Reporting Other Income Related to Your Home Sale, later.
taxmap/pubs/p523-004.htm#en_us_publink100011888
If you did not receive a Form 1099-S,(p19)
use the following method to compute your real estate tax deduction, which can sometimes be different from the amount of real estate tax you actually paid.
taxmap/pubs/p523-004.htm#en_us_publink100025367

Example.(p19)

The tax on Dennis and Beth White's home was $620 for the year. Their real property tax year was the calendar year, with payment due August 1, 2014. They sold the home on May 7, 2014. Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the home even though they did not actually pay them to the taxing authority.
Dennis and Beth owned their home during the 2014 real property tax year for 126 days (January 1 to May 6, the day before the sale). They figure their deduction for taxes as follows.
1. Total real estate taxes for the real property tax year $620
2. Number of days in the real property tax year that you owned the property 126
3. Divide line 2 by 365 (366 if leap year).345
4. Multiply line 1 by line 3. This is your deduction. Enter it on line 6 of Schedule A (Form 1040) $214
Since the buyers paid all of the taxes, Dennis and Beth also include the $214 in the home's selling price. The buyers add the $214 to their basis in the home. The buyers can deduct $406 ($620 – $214) as an itemized deduction, the taxes for the part of the year they owned the home.
taxmap/pubs/p523-004.htm#en_us_publink100011889
If you received a Form 1099-S,(p19)
start with the amount of real estate tax you actually paid in the year of sale. Subtract the buyer's share of real estate tax as shown in box 5. The result is the amount you can deduct as an itemized deduction.
taxmap/pubs/p523-004.htm#en_us_publink100011890
If you did not already deduct all your mortgage points on an earlier tax return,(p19)
you may be able to deduct them on your tax return for the year of sale. See Publication 936, Home Mortgage Interest Deduction.
taxmap/pubs/p523-004.htm#en_us_publink100011891

Report on Schedule A (Form 1040), Itemized Deductions, any itemized real estate deduction.(p19)

rule
Follow the Instructions for Schedule A when completing the form.
taxmap/pubs/p523-004.htm#en_us_publink100011892

Reporting Other Income Related to Your Home Sale(p19)

rule
taxmap/pubs/p523-004.htm#en_us_publink100011893

Report as ordinary income on Form 1040 any amounts received for sales of personal property.(p19)

rule
This includes any payments you received for furniture, drapes, lawn equipment, a washer/dryer, or any other property you sold that was not a permanent part of your home.
taxmap/pubs/p523-004.htm#en_us_publink100011894

Report as ordinary income on Form 1040 any amounts received for sales of expired options to purchase your property.(p19)

rule
If you granted someone an option to buy your home and it expired in the year of sale, report the amount you received for the option as ordinary income.
taxmap/pubs/p523-004.htm#en_us_publink100011895

Report as ordinary income on Form 1040 applicable canceled or forgiven mortgage debt.(p19)

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If you went through a mortgage workout, foreclosure, or other process in which a lender forgave or canceled mortgage debt on your home, the amount of debt that was forgiven or canceled must normally be reported as income on your tax return. However, you can exclude up to $2 million of canceled or forgiven debt ($1 million if you are single or if you are married and filing separately) from your income if ALL of the following are true.
If you qualify to exclude canceled or forgiven mortgage debt on your home, file Form 982 with your tax return.
taxmap/pubs/p523-004.htm#en_us_publink100011903

Paying Back Credits and Subsidies(p20)

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If you received any homebuyer credits or federal mortgage subsidies, you may have to pay back ("recapture") some or all of the amount by increasing your tax payment.
taxmap/pubs/p523-004.htm#en_us_publink100011904

Determine any amounts you may have claimed as a first-time homebuyer tax credit.(p20)

rule
See Form 5405, Repayment of the First-Time Homebuyer Credit, to find out how much to pay back, or if you qualify for any exceptions. If you do have to repay the credit, file Form 5405 with your tax return.
taxmap/pubs/p523-004.htm#en_us_publink100011905

Determine any amounts you may have received in federal mortgage subsidies in the 9 years leading up to the date of sale.(p20)

rule
If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. You recapture the benefit by increasing your federal income tax for the year of the sale. You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax.
See Form 8828, Recapture of Federal Mortgage Subsidy, to find out how much to repay, or whether you qualify for any exceptions.
If you did not receive any federal mortgage subsidies, you must file Form 8828 with your tax return whether you sold your home at a loss or a gain. If you had a loss, you won't have to pay back any subsidy.