Primary Home Sale Sanity Check

[ColSanders83]

Hi All,

I have a quick sanity check question as my results would seem insane, except, it is the IRS after all.

In 2024 I sold my house I bought in 2012. Primary with my wife the whole time. Never used for anything else. I bought the home for $150k, sold it for $395k. I had a mortgage on it that was paid off with the sale of the home. TurboTax show the gain was $372k (sale price minus cost to sell) I didn't make nearly that much off the sale of the house. Does the IRS consider the cost of the house as income?

[xmasbaby0]

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 Premium software to report the 1099-S

[MindyB · Accepted solution]

No, none of the profit is taxable. Since you are married, and you lived in the home for 2 out of the last 5 years, you can exclude $500,000. You don't need to report this at all, unless you received a 1099-S.  If you did receive a 1099-S, review your entries, because the cost basis should be entered ($150k plus improvements, but since the gain is under the exclusion, it won't benefit you to track down the costs of improvements).  The mortgage doesn't change the facts of your gain.  If you had no 1099-S, you can delete what you've entered.

Here is an article with information you may find helpful: Tax Aspects of Home Ownership: Selling a Home

[ColSanders83]

Thanks. I understand all that, and TurboTax does say I don't need to pay taxes on the gain. What I'm trying to understand is if the IRS is considering outcome (the money I paid for the home) as income, or if there is an error in either the info I input into TurboTax (Deluxe Fed & State) or if TurboTax has a calculation issue.

[ColSanders83]

Thanks Mindy. So It sounds like I should have put in the cost of the home in the same area that it asked for home improvement costs?

[MindyB]

First, remember you only need to enter information if you received a 1009-S.  Otherwise, delete any input. The IRS doesn't want or need this information if there is no 1099-S and the gain is below the reporting threshold.

No, the IRS does not consider your cost income.  Yes, you can enter the cost of your home in the interview screen "Tell Us About the Purchase of Your Home." The cost basis includes both the original cost and home improvements.