To report Sale
of Rental Property:
Report the gain or loss on the sale of
rental property on Form 4797, Sales of Business Property. Individuals typically
use Schedule D (Form 1040), Capital Gains and Losses,
together with Form 4797.
For further information, refer
to:
If you meet
tests for Sale of Personal Residence:
It depends on how long you
owned and lived in the home before the sale and how much profit you made. If
you owned and lived in the place for two of the five years before the sale,
then up to $250,000 of profit is tax-free.
If you are married and file a
joint return, the tax-free amount doubles to $500,000. The law lets you
"exclude" this much otherwise taxable profit from your taxable
income. (If you sold for a loss, though, you can't take a deduction for that loss.)
You can use this exclusion
every time you sell a primary residence, as long as you owned and lived in it
for two of the five years leading up to the sale, and haven't claimed the
exclusion on another home in the last two years.
If your profit exceeds the
$250,000 or $500,000 limit, the excess is reported as a capital gain on
Schedule D.
