Reinvesting the proceeds into another house makes no difference at all to the taxability of profit from the sale of the first home. Form 2119 was discontinued by the Taxpayer Relief Act of 1997. Since that time, you can not defer capital gains on a home by buying one of equal or greater value. What you can do, if you owned and lived in the home for 2 of the 5 years ending on the sale date, is to not have to pay tax on a gain of up to $250,000 (Single), or $500,000 (Married Filing Jointly). Note that if you ever used the home as a rental, then the exclusion does not apply to any gain equal to the depreciation that you claimed or could have claimed. For further info, see IRS Pubs, 530, 523, and 17 http://www.irs.gov/pub/irs-pdf/p530.pdf http://www.irs.gov/pub/irs-pdf/p523.pdf http://www.irs.gov/pub/irs-pdf/p17.pdf The sale of a personal residence and then purchase of another are two independent transactions. You report the Sale of a personal residence at: Federal Taxes Wages & Income choose I'll choose what I work on, if asked OR Jump to Full List Scroll down to Less Common Income on the Sale of Home line, click start or update then enter the necessary information in response to the interview The purchase of a new personal residence is not a reportable event. You can deduct mortgage interest, points, and real estate property tax paid at closing. You report those expenses along with other mortgage interest/property taxes paid in the year at Federal Taxes (or Personal if using Home and Business) Deductions And Credits choose I'll choose what I work on, if asked OR Jump to Full List My Home All other costs paid at closing, including transfer taxes, "stamps", escrow fees, etc., are NOT deductible from current income, instead you add them to the cost basis of your home and you will get the benefit when you sell.
... View more
