If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home provides rules and worksheets. Topic No. 409 covers general capital gain and loss information. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale.
When you receive your 1099S for the sale of the home, you would calculate your basis as the price you paid for the home, PLUS closing costs and any major improvements, then subtract the selling price to calculate the gain amount. Our tax software will let you know if any of the gain is taxable. If there is a capital loss, it is not eligible for a deduction.
If you are renting the home, as in your airbnb example, that would move the transaction to a business property, if you lived in the home for part of the time, then some of the exclusion would apply, however the rental period will change the calculation of the gain. If you are renting the home, you would report that on the Schedule E, and you would be able to deduct expenses and/or depreciate some of the capital improvements. Any business activity such as Uber or Airbnb (rentals) would be considered ordinary income (passive for rentals) and would not be classified as a capital gain.
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