On the return you will enter the sales price on the form 1099-S and the cost basis of the home (mortgage payoffs have NOTHING to do with a profit or loss).
Cost basis of the home includes :
Original purchase price of the home + the closing costs +
Closing costs for selling the home ( do NOT include mortgage payoffs) +
Any improvements you made while you owned the home ( like roof replacements) -
Any casualty losses +
Any other costs not already mentioned.
