There are three tests you must meet in order to treat the gain from the sale of your main home as tax-free:
- Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous, nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary residence, then rented it out for two years prior to the sale, for example, you would still qualify under this test.
- Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
- Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.
TIP: Be sure to carefully answer the interview questions while entering the transaction.
Here is how to enter the sale of a Primary Residence.
You report the Sale of a personal residence at:
Federal Taxes
Wages & Income
choose I'll choose what I work on, if asked OR Jump to Full List
Scroll down to
Less Common Income
on the
Sale of Home line, click start or update
then enter the necessary information in response to the interview
Tax Aspects of Selling a Home
If you receive an informational income-reporting document such as Form 1099-S, Proceeds From Real Estate Transactions, you must report the sale of the home even if the gain from the sale is excludable. Additionally, you must report the sale of the home if you can't exclude all of your capital gain from income.
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