When someone sells their home, they don't usually owe taxes on the proceeds of the home sale. But during the closing process, the closing agent asks if the owners used the home for business and/or claimed the home office deduction. If they answer yes, that triggers a 1099-S form.
Can someone please help me understand how claiming the home office deduction and/or using the home for a small side business would impact tax liability? Would someone in this situation now owe taxes on the proceeds of their home sale? And if so, how would they go about estimating that tax?
Thank you!
