Many people move during the summer. If you are selling your home you may qualify to exclude all or part of any gain from the sale from your income when filing your tax return.
When selling a home, homeowners should think about:
Ownership and use
To claim the exclusion, you must meet ownership and use tests. During the five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.
Those who sell their main home for a capital gain may be able to exclude up to $250,000 of that gain from their income. If you file a joint return with your spouse, you may be able to exclude up to $500,000. Homeowners excluding all the gain do not need to report the sale on their tax return unless a Form 1099-S was issued.
Some homeowners experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.
If you own more than one home you can exclude the gain only on the sale of your main home. You must pay taxes on the gain from selling any other home.
If you don’t qualify to exclude all of the taxable gain from your income, you must report the gain from the sale of your home when you file your tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return. If you receive Form 1099-S, Proceeds from Real Estate Transactions, you must report the sale on your tax return even if you have no taxable gain.
Generally, you must report forgiven or canceled debt as income on your tax return. This includes people who had a mortgage workout, foreclosure or other canceled mortgage debt on their home. If you had debt discharged, in whole or in part on a qualified principal residence you can’t exclude that debt from income unless it was discharged before January 1, 2026, or a written agreement for the debt forgiveness was in place before January 1, 2026.
There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military or intelligence community and Peace Corps workers.