| IRS TAX TIP 2008-54
If you have a gain from the sale or exchange of
your main home, you may be able to exclude all or
part of the gain from your income.
Individuals may be able to exclude up to
$250,000 of capital gain, and married taxpayers
filing joint returns may be able to exclude up to
$500,000 of gain each time you sell your main
home, but generally no more frequently than once
every two years.
To qualify for this exclusion of gain, you must
meet ownership and use tests.
- Ownership Test: During the 5-year
period ending on the date of the sale, you
must have owned the home for at least 2 years.
- Use Test: During the 5-year period
ending on the date of the sale, you must have
lived in the home as your main home at least 2
years.
If you and your spouse file a joint return for
the year of the sale, you can exclude the gain if
either of you qualify for the exclusion. But both
of you would have to meet the use test to claim
the $500,000 maximum amount.
If you do not meet the ownership and use tests,
you may be allowed to exclude a reduced maximum
amount of the gain realized on the sale of your
home if you sold your home because of health
reasons, a change in place of employment, or
certain unforeseen circumstances. Unforeseen
circumstances include, for example, divorce or
legal separation, natural or man-made disasters
resulting in a casualty to your home, or an
involuntary conversion of your home.
If you can exclude all the gain from the sale
of your home, you do not report the gain on your
federal tax return. If you cannot exclude all the
gain from the sale of your home, or you choose not
to, use Schedule D, Capital Gains and Losses, of
the Form 1040 to report it.
For more details and information see IRS
Publication 523, Selling Your Home, available at
IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Remember that for the genuine IRS Web site be
sure to use .gov. Don't be confused by
internet sites that end in .com, .net, .org or
other designations instead of .gov. The address of
the official IRS governmental Web site is
www.irs.gov.
Links:
-
Publication 523, Selling Your Home ( PDF
194K)
-
Schedule D, Capital Gains and Losses ( PDF
136K)
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