I sold my main home and received a 1099S, however, over half of the proceeds was to payoff the mortgage. When I entered the 1099S, it comes up as a gain of $499,000

[DayDeCZ]

I would like to know what do i need to do to indicate that under $250,000 was the remaining balance after mortgage was paid off

[Mike9241]

mortgages do not enter into the computation of gain or loss.

gain = sales price less the total of selling expenses (they do not include prorations like real estate taxes, insurance, HOA fees) and less your tax basis

tax basis is the purchase price plus closing costs plus the costs of improvements.

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[DayDeCZ]

One of the documents received from our lawyer lists seller's expense. That document list mortgage payoff, legal and preparation fees and others. I used that amount and the original purchase price plus closing cost.

Does that sound right?

[DayDeCZ]

One of the documents received from our lawyer lists seller's expense. That document list mortgage payoff, legal and preparation fees and others. I used that amount and the original purchase price plus closing cost.

Does that sound right,?

[Vanessa A]

No.  That is not right.  You cannot include your mortgage payoff as part of your selling expenses.  If you are including the mortgage payoff, you are overstating your costs and understating your profit.  

When you enter your cost basis, you are entering the amount you paid for your house plus improvements and certain other fees you paid when you bought the house.  If you then include your mortgage as a sellers expense, you are including the cost of your home a second time or at least part of the cost of your home a second time. 

Your sellers expenses would include

• Realtor Fees
• Advertising Fees
• Mortgage points YOU paid that normally would have been the buyers responsibility
• Legal fees 

Selling Your Home