Impact of home sale on income tax filing requirement for elderly nursing home resident

[ghellerf]

My 84-year-old mother is a resident in a nursing home in Wisconsin. Her only income is social security benefits and a pension. She also receives Medicaid benefits to help cover her residency expenses. My father is deceased. My parents have not had to file an income tax return for a number of years due to low income. We sold their home in 2023. My mother received a little under $47,000 in gross proceeds from the sale. Due to her receiving those proceeds, will my mother need to file either a federal or state income tax return for 2023?

[ghellerf]

I should also mention my mother did receive a form 1099-S Proceeds from Real Estate Transactions.

[Cynthiad66]

It depends, if she owned and lived in the house for at least two of the last five years before the sale then up to $250,000 profit is tax-free.  Sounds like she sold it for $47,000 and therefore would not have to file, solely based on the sale of the residence.

A 1099-S is NOT required if the seller certifies that the sale price is for $250K or less and the sale is for their principal residence.  Just because she received a form 1099-S does not make it mandatory to file if the requirements mentioned above are met.

Tax Aspects of Selling a Home

[ghellerf]

My mother did own and live in the house in Wisconsin as her principal residence for at least two of the last five years before the sale. The home's sale price was $126,000. My mother and her children split the proceeds because the children were named on life estate quit claim deeds. My mother's portion/share of the sale proceeds was a little under $47,000. If the threshold is $250,000 profit, then, as I understand your reply, my mother would not be required to file a return solely based on the sale. 

[ghellerf]

Thank you.

[AmyC]

Your understanding is correct. The IRS may send a request for information. If they do, just provide the same information, she lived in the home for years and qualifies for the sale of main home exemption of $250,000 which is more than the sales price. She didn't use it as business property and depreciate it since 1997, nothing weird to make any of it taxable. All is well. Tuck the form away with a note just in case you get a letter later.