You're right. That income is free and clear as long as:
- You owned the home
- It was your main home for two years or more within the five years leading up to the sale
- You waited at least two years between selling your primary home and excluding your first $250,000 or $500,000 from taxes. In other words, you may buy and sell as many primary homes as you'd like, but you'll only get this tax benefit every two year
However, the solution might be an easy one. Only report the sale if:
- The gain exceeds the amounts that are exempt from tax, or
- You received a Form 1099-S from the closing agent.
A closing agent can get an affidavit or statement from you that the sale meets the requirements for exclusion and, if so, not send a Form 1099-S reporting the sale. If the gain is fully excludable and you don't get a Form 1099-S, there is no reason to report the sale on your tax return and you can delete the sale.
Please feel free to post any additional details or questions in the comment section.
If you did receive a 1099-S, please double check your entries here. It's hard to tell what the issue is without knowing more about your return.
Tip: Take your time and pay close attention; there's a lot of info and it's easy to miss if you're in a hurry.
Follow the prompts to enter information about the sale of your rental. As you go through the interview, these terms and definitions may be helpful:
· Sales Price – If you received a Form 1099-S, look in Box 2 (Gross Proceeds), which will generally be your contract sales price.
o You can also use the Gross Proceeds amount from your settlement closing statement.
· Sales Expenses for selling your property include:
o Sales commissions
o Advertising Expenses
o Legal Fees
o Broker Fees
o Transfer taxes
· Cost Basis is the rental's purchase price plus buying costs (fees you paid in connection with the purchase such as legal fees, abstract fees, survey charges, owner's title, etc.) plus improvements, minus depreciation.
· Adjusted basis is the rental's purchase price plus buying costs plus improvements plus sales expenses, minus prior-year depreciation.
- Click on Federal
- Click on Wages and Income
- Click on I'll choose what I work on
- Scroll down to Less Common Income
- On Sale of Home (gain or loss), click the start or update button
You will need:
- The date you sold your home and the selling price (from your closing statement)
- The date you bought your home and the purchase price (from your closing statement)
- The cost of any major improvements you made, so we can deduct them for you
- Form 1099-C if you sold your home at a loss (short sale)
