Shelter home sale proceeds

[mmezerve]

My wife and I are selling our primary residence but will not be purchasing another home for at least 1-2 years.  We have only owned the home for 2.5 years and need to move closer to family.  The down payment for the home was a loan from my 401k.  What do I need to do, if anything, to shelter these home sale proceeds if they are not being used to purchase another home within the year?  The proceeds will amount to approx. 25K.

[DoninGA]

The requirement to purchase another home of the same price as the sale price of the prior home to defer capital gains taxes was removed from the tax code in 1997.

If you sell your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

If you had a gain greater then the exclusion amounts then you would have to report the sale. Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported.

[xmasbaby0]

Purchasing another home with the proceeds has been irrelevant since 1997.

SALE OF HOUSE

If your gain was more than  $250,000 filing Single, or more than $500,000 filing Married Filing Jointly the sale must be reported on your tax return.  Whether you re-invested the gain in to another house is irrelevant.  If you  have a Form 1099-S go to Federal>Wages and Income>Less Common Income>Sale of Home (gain or loss)

If you owned and lived in the home as your primary residence for at least 2 of the last 5 years on the date of the sale, you do not have to report the home sale if the gain is less than $250K filing Single, or less than $500K filing Married Filing Jointly (and you both owned and lived in the home for at least 2 years).

• If you are using online TT, you need Premier or Self-Employed software to report the 1099-S
• .https://ttlc.intuit.com/questions/1901135-i-sold-my-home-at-a-loss-is-this-deductible

[mmezerve]

Thank you for the reply, DoninGA.  The gain on sale of this home will clearly fall below the $500,000 mark.  Are you also saying that there is no requirement to report the sale despite the fact that I'm essentially having my pretax 401k $$ returned to me on sale?  I think that's my biggest concern.  Granted, it is a 401K loan but I just want to be sure.

Thanks!

[DoninGA · Accepted solution]

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@mmezerve wrote:

Thank you for the reply, DoninGA.  The gain on sale of this home will clearly fall below the $500,000 mark.  Are you also saying that there is no requirement to report the sale despite the fact that I'm essentially having my pretax 401k $$ returned to me on sale?  I think that's my biggest concern.  Granted, it is a 401K loan but I just want to be sure.

Thanks!

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As long as you continue to pay the loan on the 401(k) the proceeds from the sale are not relevant to your loan.