The Sale of Your Main Home

Selling Your Main Home

This explains the term “main home.” Usually, the home you live in most of the time is your main home and can be a house, houseboat, mobile home, cooperative apartment or condominium.

To exclude gain under the rules, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale.


If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land.

If you have more than one home, you can exclude gain only from the sale of your main home. You must include in income gain from the sale of any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Figuring Gain or Loss

To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Subtract the adjusted basis from the amount realized to get your gain or loss. You may be able to exclude up to $250,000 of the gain from your income, or up to $500,000 if you file Married Filing Jointly. A loss from the sale of your main home is not tax deductible because it is personal use property. The closing real estate agent should provide you and the IRS with Form 1099-S, Proceeds From Real Estate Transactions, and the total amount received should be shown in Box 2.


Selling Price

The selling price is the total amount you receive for your home. It includes money, all notes, mortgages, or other debts assumed by the buyer as part of the sale, and the fair market value of any other property or any services you receive.
The selling price of your home does not include amounts you received for personal property sold with your home. Personal property is property that is not a permanent part of the home. Examples are furniture, draperies, and lawn equipment. Separately stated amounts you received for these items should not be shown on Form 1099-S. Any gains from sales of personal property must be included in your income. The capital gains and losses are reported on Schedule D. The Schedule D instructions explain how to report transactions from Form 1099-S

The amount realized when selling your main home is the selling price minus selling expenses. These include commissions, advertising fees, legal fees and loan charges, such as points or loan placement fees. If the amount realized is more than the adjusted basis, the difference, minus any part that is excludable, is generally a taxable gain. If not, the difference is a loss and cannot be deducted.

Basis in a Home

The basis in a home is determined by how the home was acquired. If the home is is built or bought, the basis is the cost of the home. If your home was acquired another way, such as a gift or inheritance, the basis is either the Fair Market Value(FMV) when you got it or the previous owners adjusted basis.

Adjusted Basis of a Home

While you own your home, you made need to make adjustments to the basis, either increases or decreases. This must be determined before you can calculate the gain or loss when you sell your home.

Increases include additions and other improvements that have a useful life of more than a year, special assessments for local improvements, and amounts spent after a casualty to restore damaged property.

Decreases include gain that was postponed from the sale of a previous home before May 7, 1997, deductible casualty losses, insurance payments received or expected for casualty losses, and payments received for granting a right-of-way or easement.

Improvements add to the value of a home, prolong its useful life, or adapt it to new uses. Examples of improvements include adding a bathroom in a unfinished basement, constructing a new fence, adding new plumbing or wiring, and replacing a roof. Theses improvements are added to the basis or your home.

Repairs maintain a home but do not add value or prolong its life. Repairs include painting inside or out, fixing gutters, floors or broken windows, and repairing leaks. You do not add these to the cost basis of your home.

As always, it is very important to keep accurate records for everything related to your home.

For more detailed information, refer to IRS Publication 523 Selling Your Home

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