I sold my primary residence of 17 years and made a profit of $147,000. Do I have to report it on my tax return?

[SweetieJean]

Did you receive a 1099-S?

[Texas Roger · Accepted solution]

You may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases).

To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale (closing), you must have:

Owned the home for at least 2 years (24 months) (the ownership test), and

Lived in the home as your main home for at least 2 years (24 months) (the use test).

If you qualify for the capital gain exclusion, you do not have to report the gain on the sale of your personal residence on your federal tax return unless the gain on the sale was greater than the exclusion, you rented the home out, you claimed a home office deduction, or you received a Form 1099-S for the sale of the home.

[Hal_Al]

The 1099-S may have been included in your closing documents, instead of arriving in the mail, in Jan. or Feb. of the following year.

[SweetieJean]

Just remember that, when calculating profit, do not factor in any mortgage payoff.

[higinger]

Thank you, but I'm not sure I understand what that means.  The $147,000 was what I had left after I paid off the mortgage, which I believe is my profit.  Would you be kind enough to elaborate? Thank you.

[SweetieJean]

That is not your profit. Your profit is the Sale Price minus the Purchase Price minus the expenses of the sale. Did you make any property improvements over the years?

Here's an oversimplified example:
Purchase Price  = $100,000
Outstanding Mortgage  = $53,000
Sale Price  =  $300,000
Profit  = $300,000 minus 100,000 equals $200,000.

It is NOT 300,000 minus 100,000 minus 53,000 equals $147,000.

[higinger]

I paid $100,00 for my house; sold it for $257,000.  During my ownership, I made about $40,00 in improvements: replaced two decks, roof, painted, green improvements: installed dual paned windows, new doors, tankless water heater. If costs of sale include realtor fee and transfer fees, etc., they totaled about $7,000. Again thank you.

[Texas Roger]

Your gain would be less than the $250,000 ($500,000 if MFJ) exclusion amount so you would not need to enter the sale on your tax return unless you received a 1099-S (probably with your closing papers), rented the house out while you owned it or claimed a home office deduction and you meet the ownership and use tests in my answer above.