Sale of a Home

[Brigitt]

The 1099-S that I received from the Title Company is for the gross proceeds from the sale of the home. However, this is not what I received after the mortgage pay-off.  My profit is much lower. Do I need to pay capital gains taxes on the gross proceeds minus the $250,000 exclusion?

[Bsch4477]

The mortgage pay off is not relevant to what your profit is. Your gain is the difference between the amount of the sale minus costs of the sale and minus what you paid for the home and capital improvements. 

[MayaD · Accepted solution]

Enter the amount of gross proceed as it is on form 1099-S then add the deductions/expenses to the cost basis of the house.

Expenses that can be deducted:

• advertising
• appraisal fees
• attorney fees
• closing fees
• document preparation fees
• escrow fees
• mortgage satisfaction fees
• notary fees
• points paid by seller to obtain financing for buyer
• real estate broker's commission
• recording fees (if paid by the seller)
• costs of removing title clouds
• settlement fees
• title search fees, and
• transfer or stamp taxes charged by city, county, or state governments.

Most of these costs will be listed in the closing statement prepared by the escrow, bank or other financial institution, (or attorney, in some states) when you sell your house.

When selling your main home, if you owned and lived in the home for two of the five years before the sale, up to $250,000 of profit is tax-free.

[Brenk538]

Sold my home after 30 years. Total sales  after remaining 1rst and 2nd mortgage was under the $500 K threshold. Do I need to complete section part with adjusted cost basis or can I just move on?  I did NOT receive a 1099 S. MB

[DoninGA]

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@Brenk538 wrote:

Sold my home after 30 years. Total sales  after remaining 1rst and 2nd mortgage was under the $500 K threshold. Do I need to complete section part with adjusted cost basis or can I just move on?  I did NOT receive a 1099 S. MB

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Mortgages are not included in the calculation for the gain or loss on the sale of the home.

Gain or Loss = Sales Price minus Sales Expenses minus Adjusted Basis of the home (Original Purchase Price plus the cost of improvements prior to the sale)

If you sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

If you had a gain greater then the exclusion amounts then you would have to report the sale. Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported. 

It would be in your best interest to report the sale of the home on your tax return just in case the IRS receives a Form 1099-S for the sale even if you did not.