2023 Publication 523

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Department of the Treasury

Internal Revenue Service

Publication 523

Cat. No. 15044W

Selling

Your Home

For use in preparing

2023 Returns

Get forms and other information faster and easier at:

• IRS.gov (English)

• IRS.gov/Spanish (Español)

•

IRS.gov/Chinese (中文)

•

IRS.gov/Korean (한국어)

• IRS.gov/Russian (Pусский)

• IRS.gov/Vietnamese (Tiếng Việt)

Contents

Future Developments ....................... 1

Reminders ............................... 1

Introduction .............................. 2

Does Your Home Sale Qualify for the Exclusion

of Gain? .............................. 3

Eligibility Test ........................... 3

Does Your Home Qualify for a Partial Exclusion

of Gain? .............................. 6

Figuring Gain or Loss ....................... 8

Basis Adjustments—Details and Exceptions ..... 8

Property Used Partly for Business or Rental .... 12

Business or Rental Use of Home ............. 16

How Much Is Taxable? ..................... 16

Recapturing Depreciation ................. 17

Reporting Your Home Sale .................. 18

Reporting Gain or Loss on Your Home Sale .... 18

Reporting Deductions Related to Your Home

Sale ............................... 19

Reporting Other Income Related to Your

Home Sale .......................... 20

Paying Back Credits and Subsidies .......... 20

How To Get Tax Help ....................... 20

Index .................................. 25

Future Developments

For the latest information about developments related to

Pub. 523, such as legislation enacted after it was

published, go to IRS.gov/Pub523.

What’s New

Home energy tax credits. Home improvements that use

clean energy, or otherwise add to energy efficiency, may

qualify for home energy tax credits, which were extended,

increased, and/or modified by the Inflation Reduction Act,

P. L. 117-169, sections 13301 and 13302. These credits

are detailed in Energy credits and subsidies. See sections

25C and 25D. For more information, see IRS News Re-

lease 2023-97, available at IRS.gov/newsroom/irs-going-

green-could-help-taxpayers-qualify-for-expanded-home-

energy-tax-credits.

Reminders

Photographs of missing children. The IRS is a proud

partner with the National Center for Missing & Exploited

Feb 7, 2024

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Children® (NCMEC). Photographs of missing children se-

lected by the Center may appear in this publication on pa-

ges that would otherwise be blank. You can help bring

these children home by looking at the photographs and

calling 800-THE-LOST (800-843-5678) if you recognize a

child.

Special rules for capital gains invested in Qualified

Opportunity Funds. Effective December 22, 2017, sec-

tion 1400Z-2 provides a temporary deferral of inclusion in

gross income for capital gains invested in Qualified Op-

portunity Funds, and permanent exclusion of capital gains

from the sale or exchange of an investment in the Quali-

fied Opportunity Fund if the investment is held for at least

10 years. For more information, see the Instructions for

Form 8949.

Extension of the exclusion of canceled or forgiven

mortgage debt from income. The exclusion of income

for mortgage debt canceled or forgiven was extended

through December 31, 2025. The indebtedness dis-

charged must generally be on a qualified principal resi-

dence, and based on an agreement in writing prior to Jan-

uary 1, 2026. See Report as ordinary income on Form

1040, 1040-SR, or 1040-NR applicable canceled or for-

given mortgage debt, later.

Introduction

This publication explains the tax rules that apply when you

sell or otherwise give up ownership of a home. If you meet

certain conditions, you may exclude the first $250,000 of

gain from the sale of your home from your income and

avoid paying taxes on it. The exclusion is increased to

$500,000 for a married couple filing jointly.

This publication also has worksheets for calculations

relating to the sale of your home. It will show you how to:

1. Figure your maximum exclusion, using Worksheet 1,

2. Determine if you have a gain or loss on the sale or ex-

change of your home, using Worksheet 2,

3. Figure how much of any gain is taxable (if any) using

Worksheet 3, and

4. Report the transaction correctly on your tax return, us-

ing guidance included in Worksheet 3.

Comments and suggestions. We welcome your com-

ments about this publication and suggestions for future

editions.

You can send us comments through IRS.gov/

FormComments. Or, you can write to the Internal Revenue

Service, Tax Forms and Publications, 1111 Constitution

Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each com-

ment received, we do appreciate your feedback and will

consider your comments and suggestions as we revise

our tax forms, instructions, and publications. Don’t send

tax questions, tax returns, or payments to the above ad-

dress.

Getting answers to your tax questions. If you have

a tax question not answered by this publication or the How

To Get Tax Help section at the end of this publication, go

to the IRS Interactive Tax Assistant page at IRS.gov/

Help/ITA where you can find topics by using the search

feature or viewing the categories listed.

Getting tax forms, instructions, and publications.

Go to IRS.gov/Forms to download current and prior-year

forms, instructions, and publications.

Ordering tax forms, instructions, and publications.

Go to IRS.gov/OrderForms to order current forms, instruc-

tions, and publications; call 800-829-3676 to order

prior-year forms and instructions. The IRS will process

your order for forms and publications as soon as possible.

Don’t resubmit requests you’ve already sent us. You can

get forms and publications faster online.

Useful Items

You may want to see:

Publication

504 Divorced or Separated Individuals

505 Tax Withholding and Estimated Tax

527 Residential Rental Property

530 Tax Information for Homeowners

537 Installment Sales

544 Sales and Other Dispositions of Assets

547 Casualties, Disasters, and Thefts

551 Basis of Assets

587 Business Use of Your Home

936 Home Mortgage Interest Deduction

4681 Canceled Debts, Foreclosures,

Repossessions, and Abandonments

5797 Home Energy Tax Credits

Form (and Instructions)

Schedule A (Form 1040) Itemized Deductions

Schedule B (Form 1040) Interest and Ordinary

Dividends

Schedule D (Form 1040) Capital Gains and Losses

982 Reduction of Tax Attributes Due to Discharge of

Indebtedness (and Section 1082 Basis

Adjustment)

1040 U.S. Individual Income Tax Return

1040-NR U.S. Nonresident Alien Income Tax Return

1040-SR U.S. Income Tax Return for Seniors

1099-S Proceeds From Real Estate Transactions

4797 Sales of Business Property

5405 Repayment of the First-Time Homebuyer

Credit

6252 Installment Sale Income

8822 Change of Address

504

505

527

530

537

544

547

551

587

936

4681

5797

Schedule A (Form 1040)

Schedule B (Form 1040)

Schedule D (Form 1040)

982

1040

1040-NR

1040-SR

1099-S

4797

5405

6252

8822

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8828 Recapture of Federal Mortgage Subsidy

8908 Energy Efficient Home Credit

8949 Sales and Other Dispositions of Capital Assets

W-2 Wage and Tax Statement

W-7 Application for IRS Individual Taxpayer

Identification Number

Does Your Home Sale Qualify

for the Exclusion of Gain?

The tax code recognizes the importance of home owner-

ship by allowing you to exclude gain when you sell your

main home. To qualify for the maximum exclusion of gain

($250,000 or $500,000 if married filing jointly), you must

meet the Eligibility Test, explained later. To qualify for a

partial exclusion of gain, meaning an exclusion of gain

less than the full amount, you must meet one of the situa-

tions listed in Does Your Home Qualify for a Partial Exclu-

sion of Gain, later.

Before considering the Eligibility Test or whether your

home qualifies for a partial exclusion, you should consider

some preliminary items.

Transfer of your home to a spouse or an ex-spouse.

Generally, if you transferred your home (or share of a

jointly owned home) to a spouse or ex-spouse as part of a

divorce settlement, you are considered to have no gain or

loss. You have nothing to report from the transfer and this

entire publication doesn’t apply to you. However, if your

spouse or ex-spouse is a nonresident alien, then you likely

will have a gain or loss from the transfer and the tests in

this publication apply.

Home’s date of sale. To determine if you meet the Eligi-

bility Test or qualify for a partial exclusion, you will need to

know the home's date of sale, meaning when you sold it. If

you received Form 1099-S, Proceeds From Real Estate

Transactions, the date of sale appears in box 1. If you

didn’t receive Form 1099-S, the date of sale is either the

date the title transferred or the date the economic burdens

and benefits of ownership shifted to the buyer, whichever

date is earlier. In most cases, these dates are the same.

Sale of your main home. You may take the exclusion,

whether maximum or partial, only on the sale of a home

that is your principal residence, meaning your main home.

An individual has only one main home at a time. If you

own and live in just one home, then that property is your

main home. If you own or live in more than one home, then

you must apply a "facts and circumstances" test to deter-

mine which property is your main home. While the most

important factor is where you spend the most time, other

factors are relevant as well. They are listed below. The

more of these factors that are true of a home, the more

likely that it is your main home.

•

The address listed on your:

1. U.S. Postal Service address,

8828

8908

8949

W-2

W-7

2. Voter Registration Card,

3. Federal and state tax returns, and

4. Driver's license or car registration.

•

The home is near:

1. Where you work,

2. Where you bank,

3. The residence of one or more family members,

and

4. Recreational clubs or religious organizations of

which you are a member.

Finally, the exclusion can apply to many different types

of housing facilities. A single-family home, a condomin-

ium, a cooperative apartment, a mobile home, and a

houseboat each may be a main home and therefore qual-

ify for the exclusion.

Eligibility Test

The Eligibility Test determines whether you are eligible for

the maximum exclusion of gain ($250,000 or $500,000 if

married filing jointly).

Eligibility Step 1—Automatic

Disqualification

Determine whether any of the automatic disqualifica-

tions apply. Your home sale isn’t eligible for the exclu-

sion if ANY of the following are true.

•

You acquired the property through a like-kind ex-

change (1031 exchange), during the past 5 years. See

Pub. 544, Sales and Other Dispositions of Assets.

•

You are subject to expatriate tax. For more information

about expatriate tax, see chapter 4 of Pub. 519, U.S.

Tax Guide for Aliens.

If any of these conditions are true, the exclusion doesn’t

apply. Skip to Figuring Gain or Loss, later.

Eligibility Step 2—Ownership

Determine whether you meet the ownership require-

ment. If you owned the home for at least 24 months (2

years) out of the last 5 years leading up to the date of sale

(date of the closing), you meet the ownership requirement.

For a married couple filing jointly, only one spouse has to

meet the ownership requirement.

Eligibility Step 3—Residence

Determine whether you meet the residence require-

ment. If you owned the home and used it as your resi-

dence for at least 24 months of the previous 5 years, you

meet the residence requirement. The 24 months of resi-

dence can fall anywhere within the 5-year period, and it

doesn't have to be a single block of time. All that is re-

quired is a total of 24 months (730 days) of residence

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during the 5-year period. Unlike the ownership require-

ment, each spouse must meet the residence requirement

individually for a married couple filing jointly to get the full

exclusion.

If you were ever away from home, you need to de-

termine whether that time counts toward your residence

requirement. A vacation or other short absence counts as

time you lived at home (even if you rented out your home

while you were gone).

If you become physically or mentally unable to

care for yourself, and you use the residence as your

main home for at least 12 months in the 5 years preceding

the sale or exchange, any time you spent living in a care

facility (such as a nursing home) counts toward your

2-year residence requirement, so long as the facility has a

license from a state or other political entity to care for peo-

ple with your condition.

Eligibility Step 4—Look-Back

Determine whether you meet the look-back require-

ment. If you didn't sell another home during the 2-year

period before the date of sale (or, if you did sell another

home during this period, but didn't take an exclusion of the

gain earned from it), you meet the look-back requirement.

You may take the exclusion only once during a 2-year pe-

riod.

Eligibility Step 5—Exceptions to the

Eligibility Test

There are some exceptions to the Eligibility Test. If any of

the following situations apply to you, read on to see if they

may affect your qualification. If none of these situations

apply, skip to Step 6.

•

A separation or divorce occurred during the ownership

of the home. See Separated or divorced taxpayers.

•

The death of a spouse occurred during the ownership

of the home. See Surviving spouses.

•

The sale involved vacant land. See Vacant land next

to home.

•

You owned a remainder interest, meaning the right to

own a home in the future, and you sold that right. See

Remainder interest.

•

Your previous home was destroyed or condemned.

See Home destroyed or condemned—considerations

for benefits.

•

You were a service member during the ownership of

the home. See Service, Intelligence, and Peace Corps

personnel.

•

You acquired or are relinquishing the home in a

like-kind exchange. See Like-kind/1031 exchange.

•

You used a portion of the real property, separate from

the living space, for business or rental use, and you

didn’t use any of the separate portion for residential

use for 2 years out of the 5 years leading up to the

sale. See Property Used Partly for Business or Rental.

•

You or your spouse (or former spouse) used the entire

property as a vacation home or rental after 2008. See

Business or Rental Use of Home.

Separated or divorced taxpayers. If you were separa-

ted or divorced prior to the sale of the home, you can treat

the home as your residence if:

•

You are a sole or joint owner, and

•

Your spouse or former spouse is allowed to live in the

home under a divorce or separation agreement and

uses the home as his or her main home.

If your home was transferred to you by a spouse or

ex-spouse (whether in connection with a divorce or not),

you can count any time when your spouse owned the

home as time when you owned it. However, you must

meet the residence requirement on your own. If you

owned your home prior to your marriage and after your di-

vorce or separation, and your spouse or former spouse is

not allowed to live in the home under a divorce or separa-

tion agreement, you count any time that you owned the

home solely or jointly with your spouse as time when you

owned it, and you must meet the residence requirement

on your own.

Surviving spouses. If you are a surviving spouse who

doesn't meet the 2-year ownership and residence require-

ments on your own, consider the following rule. If you

haven’t remarried at the time of the sale, then you may in-

clude any time when your late spouse owned and lived in

the home, even if without you, to meet the ownership and

residence requirements.

Also, you may be able to increase your exclusion

amount from $250,000 to $500,000. You may take the

higher exclusion if you meet all of the following conditions.

1. You sell your home within 2 years of the death of your

spouse;

2. You haven’t remarried at the time of the sale;

3. Neither you nor your late spouse took the exclusion

on another home sold less than 2 years before the

date of the current home sale; and

4. You meet the 2-year ownership and residence re-

quirements (including your late spouse's times of

ownership and residence, if applicable).

Service, Intelligence, and Peace Corps personnel. If

you or your spouse are a member of the Uniformed Serv-

ices or the Foreign Service, an employee of the intelli-

gence community of the United States, or an employee,

enrolled volunteer or volunteer leader of the Peace Corps,

you may choose to suspend the 5-year test period for

ownership and residence when you’re on qualified official

extended duty. This means you may be able to meet the

2-year residence test even if, because of your service, you

didn’t actually live in your home for at least the 2 years

during the 5-year period ending on the date of sale. Make

the election by filing your tax return for the year of the sale

or exchange of your main home, and exclude the gain

from your taxable income.

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Qualified extended duty. You are on qualified exten-

ded duty if:

•

You are called or ordered to active duty for an indefi-

nite period, or for a definite period of more than 90

days.

•

You are serving at a duty station at least 50 miles from

your main home, or you are living in government quar-

ters under government orders.

•

You are one of the following:

1. A member of the armed forces (Army, Navy, Air

Force, Marine Corps, Space Force, Coast Guard);

2. A member of the commissioned corps of the Na-

tional Oceanic and Atmospheric Administration

(NOAA) or the Public Health Service;

3. A Foreign Service chief of mission, ambassa-

dor-at-large, or officer;

4. A member of the Senior Foreign Service or the

Foreign Service personnel;

5. An employee, enrolled volunteer, or enrolled vol-

unteer leader of the Peace Corps serving outside

the United States; or

6. An employee of the intelligence community,

meaning:

a. The Office of the Director of National Intelli-

gence, the Central Intelligence Agency, the

National Security Agency, the Defense Intelli-

gence Agency, the National Geospatial-Intelli-

gence Agency, or the National Reconnais-

sance Office;

b. Any other office within the Department of De-

fense for the collection of specialized national

intelligence through reconnaissance pro-

grams;

c. Any of the intelligence elements of the Army,

Navy, Air Force, Marine Corps, Federal Bureau

of Investigation, Department of the Treasury,

Department of Energy, and Coast Guard;

d. The Bureau of Intelligence and Research of

the Department of State; or

e. Any of the elements of the Department of

Homeland Security concerned with the analy-

ses of foreign intelligence information.

Period of suspension. The period of suspension

can’t last more than 10 years. Together, the 10-year sus-

pension period and the 5-year test period can be as long

as, but no more than, 15 years. You can’t suspend the

5-year period for more than one property at a time. You

can revoke your choice to suspend the 5-year period at

any time.

Example 1. You bought a home on May 1, 2007. You

used it as your main home until August 27, 2010. On Au-

gust 28, 2010, you went on qualified official extended duty

with the Navy. You didn’t live in the house again before

selling it on August 1, 2023. You choose to use the entire

10-year suspension period. Therefore, the suspension pe-

riod would extend back from August 1, 2023, to August 2,

2013, and the 5-year test period would extend back to Au-

gust 2, 2008. During that period, you owned the house all

5 years and lived in it as your main home from August 2,

2008, until August 28, 2010, a period of more than 24

months. You meet the ownership and use tests because

you owned and lived in the home for at least 2 years dur-

ing this test period.

Example 2. You bought and moved into a home in

2014. You lived in it as your main home for 3

/2 years. For

the next 6 years, you didn’t live in it because you were on

qualified official extended duty with the Army. You then

sold the home at a gain in 2023. To meet the use test, you

choose to suspend the 5-year test period for the 6 years

you were on qualified official extended duty. This means

you can disregard those 6 years. Therefore, your 5-year

test period consists of the 5 years before you went on

qualified official extended duty. You meet the ownership

and use tests because you owned and lived in the home

for 3

/2 years during this test period.

Vacant land next to home. You can include the sale of

vacant land adjacent to the land on which your home sits

as part of a sale of your home if ALL of the following are

true.

•

You owned and used the vacant land as part of your

home.

•

The sale of the vacant land and the sale of your home

occurred within 2 years of each other.

•

Both sales either meet the Eligibility Test or qualify for

partial tax benefits, as described earlier.

Also, if your sale of vacant land meets all these require-

ments, you must treat that sale and the sale of your home

as a single transaction for tax purposes, meaning that you

may apply the exclusion only once.

Note. However, if you move your home from the land

on which it stood (meaning you relocate the actual physi-

cal structure), then that land no longer counts as part of

your home. For example, if you move a mobile home to a

new lot and sell the old lot, then you can’t treat the sale of

the old lot as the sale of your home.

Home destroyed or condemned—considerations for

benefits. If an earlier home of yours was destroyed or

condemned, you may be able to count your time there to-

ward the ownership and residence test.

If your home was destroyed, see Pub. 547, Casualties,

Disasters, or Thefts. If your home was condemned, see

Pub. 544, Sales and Other Disposition of Assets.

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Remainder interest. The sale of a remainder interest in

your home is eligible for the exclusion only if both of the

following conditions are met.

•

The buyer isn’t a “related party.” A related party can be

a related person or a related corporation, trust, part-

nership, or other entity that you control or in which you

have an interest.

•

You haven't previously sold an interest in the home for

which you took the exclusion.

Like-kind/1031 exchange. If you sold a home that you

acquired in a like-kind exchange, then the following test

applies.

You can’t claim the exclusion if:

1. Either (a) or (b) applies:

a. You acquired your home in a like-kind exchange

(also known as a section 1031 exchange), or

b. Your basis in your home is determined by refer-

ence to a previous owner's basis, and that previ-

ous owner acquired the property in a like-kind ex-

change (for example, the owner acquired the

home and then gave it to you); and

2. You sold the home within 5 years of the date your

home was acquired in the like-kind exchange.

A main home is not available for exchange because the

exchange must be between like-kind real property held for

productive use in a trade or business or for investment.

Also, real property held primarily for sale is not eligible for

deferral of gain under section 1031. For an exchange of

rental property that was later converted to personal use as

a main home, there is a 5-year holding period required un-

der section 121(d)(10). A separate 2-year holding period

is required for exchanges between related persons under

section 1031(f). See Pub. 544.

If you convert your main home to a rental property (or

use a portion of the living area for productive use in a

trade or business as in Rev. Proc. 2005-14, examples 3–

6), the exchange rules under section 1031 and exclusion

of income rules under section 121 may both apply.

If the requirements of both sections 1031 and 121 are

met, the section 121 exclusion is applied first to realized

gain; section 1031 then applies, including any gain attrib-

utable to depreciation deductions. Any cash received in

exchange for the rental property is taken into account only

to the extent the cash exceeds the section 121 excluded

gain on the rental property given up in the exchange. The

period before the exchange that is after the last date the

property was used as a main home is not considered non-

qualified use for purposes of the proration rules of section

121. To figure basis of the property received in the ex-

change (replacement property), any gain excluded under

section 121 is added to your basis of your replacement

property, similar to the treatment of recognized gain. You

can’t convert the replacement property to a main home

immediately after the exchange per section 1031(a)(1),

which requires that replacement property be held either

for investment, or for productive use in a trade or busi-

ness. For more information about like-kind exchanges, see

Pub. 544.

For additional information about the intersection of sec-

tions 121 and 1031, see Rev. Proc. 2005-14, 2005-7

I.R.B. 528, available at IRS.gov/irb/

2005-07_IRB#RP-2005-14. Please note, however, that

any period after 2008 during which the property is not

used as a principal residence is, with certain exceptions,

considered nonqualified use of that property for which

gain allocable to such period may not be excluded, in ac-

cordance with section 121(b)(5). This includes property

that is separate from the main property and not a part of

the living area of the main home that is not used as a prin-

cipal residence for a period after 2008. See section 121(b)

(5)(C). See also Rev. Proc. 2005-14 for examples that il-

lustrate how to allocate basis and gain realized in an ex-

change that is also eligible for section 121 exclusion, as

well as details of depreciation recapture.

Eligibility Step 6—Final Determination of

Eligibility

If you meet the ownership, residence, and look-back re-

quirements, taking the exceptions into account, then you

meet the Eligibility Test. Your home sale qualifies for the

maximum exclusion. Skip to Worksheet 1, later.

If you didn’t meet the Eligibility Test, then your home

isn’t eligible for the maximum exclusion, but you should

continue to Does Your Home Qualify for a Partial Exclu-

sion of Gain.

Does Your Home Qualify for a Partial

Exclusion of Gain?

If you don't meet the Eligibility Test, you may still qualify for

a partial exclusion of gain. You can meet the requirements

for a partial exclusion if the main reason for your home

sale was a change in workplace location, a health issue,

or an unforeseeable event.

Work-Related Move

You meet the requirements for a partial exclusion if any of

the following events occurred during your time of owner-

ship and residence in the home.

•

You took or were transferred to a new job in a work lo-

cation at least 50 miles farther from the home than

your old work location. For example, your old work lo-

cation was 15 miles from the home and your new work

location is 65 miles from the home.

•

You had no previous work location and you began a

new job at least 50 miles from the home.

•

Either of the above is true of your spouse, a co-owner

of the home, or anyone else for whom the home was

her or his residence.

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Health-Related Move

You meet the requirements for a partial exclusion if any of

the following health-related events occurred during your

time of ownership and residence in the home.

•

You moved to obtain, provide, or facilitate diagnosis,

cure, mitigation, or treatment of disease, illness, or in-

jury for yourself or a family member.

•

You moved to obtain or provide medical or personal

care for a family member suffering from a disease, ill-

ness, or injury. A family member includes your:

1. Parent, grandparent, stepmother, stepfather;

2. Child (including adopted child, eligible foster

child, and stepchild), grandchild;

3. Brother, sister, stepbrother, stepsister, half

brother, half sister;

4. Mother-in-law, father-in-law, brother-in-law, sis-

ter-in-law, son-in-law, daughter-in-law;

5. Uncle, aunt, nephew, or niece.

•

A doctor recommended a change in residence for you

because you were experiencing a health problem.

•

The above is true of your spouse, a co-owner of the

home, or anyone else for whom the home was his or

her residence.

Unforeseeable Events

You meet the standard requirements if any of the following

events occurred during the time you owned and lived in

the home you sold.

•

Your home was destroyed or condemned.

•

Your home suffered a casualty loss because of a natu-

ral or man-made disaster or an act of terrorism. (It

doesn’t matter whether the loss is deductible on your

tax return.)

•

You, your spouse, a co-owner of the home, or anyone

else for whom the home was her or his residence:

1. Died;

2. Became divorced or legally separated, or were is-

sued a separate decree to pay maintenance (sup-

port) to the other spouse;

3. Gave birth to two or more children from the same

pregnancy;

4. Became eligible for unemployment compensation;

5. Became unable, because of a change in employ-

ment status, to pay basic living expenses for the

household (including expenses for food, clothing,

housing, medication, transportation, taxes,

court-ordered payments, and expenses reasona-

bly necessary for making an income).

6. An event is determined to be an unforeseeable

event in IRS published guidance.

Other Facts and Circumstances

Even if your situation doesn’t match any of the standard

requirements described above, you still may qualify for an

exception. You may qualify if you can demonstrate the pri-

mary reason for sale, based on facts and circumstances,

is work related, health related, or unforeseeable. Impor-

tant factors are:

•

The situation causing the sale arose during the time

you owned and used your property as your residence.

•

You sold your home not long after the situation arose.

•

You couldn’t have reasonably anticipated the situation

when you bought the home.

•

You began to experience significant financial difficulty

maintaining the home.

•

The home became significantly less suitable as a

main home for you and your family for a specific rea-

son.

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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.

Selling price

− Selling expenses

Amount realized

− Adjusted basis

Gain or loss

A positive number indicates a gain; a negative number

indicates a loss.

Certain events during your ownership, such as use of

your home for business purposes or your making improve-

ments to it, can affect your gain or loss. They are ex-

plained in this section.

See Worksheet 2, later, for steps you should follow to

figure your gain or loss.

Basis Adjustments—Details and

Exceptions

You should include many, but not all, costs associated with

the purchase and maintenance of your home in the basis

Worksheet 1. Find Your Exclusion Limit Keep for Your Records

Use this worksheet only if no automatic disqualifications apply, and take all exceptions into account.

A) Determine if you are eligible for the maximum exclusion limit.

Status You are eligible for the maximum exclusion if... Maximum

exclusion

If you’re not eligible for

the maximum exclusion

limit, then you should…

Married

filing jointly

Both spouses meet the residence and look-back requirements

and one or both spouses meet the ownership requirement.

$500,000 Determine if either spouse is

eligible for the full limit as a

single person. If not,

determine if either spouse is

eligible for a partial

exclusion.

Single,

married

filing

separately

You meet the residence, ownership, and look-back

requirements.

$250,000 Determine if you are eligible

for a partial exclusion.

Surviving

spouse

1. You sell your home within 2 years of the death of your

spouse.

2. You haven't remarried at the time of the sale.

3. Neither you nor your late spouse took the exclusion on

another home sold less than 2 years before the date of the

current home sale.

4. You meet the 2-year ownership and residence

requirements (including your late spouse's times of

ownership and residence, if applicable).

$500,000 Determine if you are eligible

for the full limit as a single

person. If not, determine if

you are eligible for a partial

exclusion.

B) Complete this section only if you have determined that you aren’t eligible for the maximum exclusion but

are eligible for a partial exclusion. If you are eligible for a partial exclusion, use this section to determine

your exclusion limit.

Step 1 Determine the shortest of the following 3 periods:

1. Your time of residence in the home during the 5-year period leading up to the sale ....

2. Your time of ownership of the home leading up to the sale ...........................

3. The time that has elapsed between the sale and the date you last sold a home for which

you took the exclusion, if applicable ..................................................

Step 2 Take the smallest period from Step 1 (you may use days or months) and divide that number

by 730 (if using days) or 24 (if using months) ..........................................

Step 3 Multiply the result from Step 2 by $250,000. This is the amount of your reduced exclusion.

For married filing jointly, continue to step 4. ..........................................

Step 4 Repeat Steps 1–3 for your spouse and add the two results ............................

C) Your exclusion limit is $___________. Only gain in excess of this amount is taxable, unless you have gain from

full or partial business or rental use. For partial use as a business or rental, see Property Used Partly for Business or

Rental. For use of the entire property for business, rental, vacation, or any other use (other than personal use as a

main home), see Business or Rental Use of Home.

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of your home. For more information on determining basis,

see Pub. 551, Basis of Assets.

Fees and Closing Costs

Some settlement fees and closing costs you can include

in your basis are:

•

Abstract fees (abstract of title fees),

•

Charges for installing utility services,

•

Legal fees (including fees for the title search and pre-

paring the sales contract and deed),

•

Recording fees,

•

Survey fees,

•

Transfer or stamp taxes, and

•

Owner's title insurance.

Settlement costs don’t include amounts placed in es-

crow for the future payment of items such as taxes and in-

surance.

Some settlement fees and closing costs you can’t in-

clude in your basis are:

•

Fire and casualty insurance premiums,

•

Rent for occupancy of the house before closing,

•

Charges for utilities or other services related to occu-

pancy of the house before closing,

•

Any fee or cost that you deducted as a moving ex-

pense (allowed for certain fees and costs before

1994),

•

Charges connected with getting a mortgage loan,

such as:

1. Mortgage insurance premiums (including funding

fees connected with loans guaranteed by the De-

partment of Veterans Affairs),

2. Loan assumption fees,

3. Cost of a credit report,

4. Fee for an appraisal required by a lender,

5. Points (discount points, loan origination fees), and

•

Fees for refinancing a mortgage.

Construction. If you contracted to have your house built

on the land you own, your basis is:

•

The cost of the land, plus

•

The amount it cost you to complete the house, includ-

ing:

1. The cost of labor and materials,

2. Any amounts paid to a contractor,

3. Any architect's fees,

4. Building permit charges,

5. Utility meter and connection charges, and

6. Legal fees directly connected with building the

house.

Your cost includes your down payment and any debt

such as a first or second mortgage or notes you gave the

seller or builder. It also includes certain settlement or clos-

ing costs. In addition, you must generally reduce your ba-

sis by points the seller paid you.

If you built all or part of your house yourself, its basis is

the total amount it cost you to complete it. Don’t include in

the cost of the house:

•

The value of your own labor, or

•

The value of any other labor for which you didn’t pay.

Costs owed by the seller that you paid. You can in-

clude in your basis any amounts the seller owes that you

agree to pay (as long as the seller doesn’t reimburse you),

such as:

•

Any real estate taxes owed up through the day before

the sale date,

•

Back interest owed by the seller,

•

The seller's title recording or mortgage fees,

•

Charges for improvements or repairs that are the sell-

er's responsibility (for example, lead paint removal),

and

•

Sales commissions (for example, payment to the sell-

er's real estate agent).

Improvements

Improvements add to the value of your home, prolong its

useful life, or adapt it to new uses. You add the cost of ad-

ditions and improvements to the basis of your property.

The following chart lists some examples of improve-

ments.

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Examples of Improvements That

Increase Basis

Keep for Your Records

Additions

Bedroom

Bathroom

Deck

Garage

Porch

Patio

Lawn & Grounds

Landscaping

Driveway

Walkway

Fence

Retaining wall

Swimming pool

Systems

Heating system

Central air conditioning

Furnace

Duct work

Central humidifier

Central vacuum

Air/water filtration systems

Wiring

Security system

Lawn sprinkler system

Exterior

Storm windows/doors

New roof

New siding

Satellite dish

Insulation

Attic

Walls

Floors

Pipes and duct work

Plumbing

Septic system

Water heater

Soft water system

Filtration system

Interior

Built-in appliances

Kitchen modernization

Flooring

Wall-to-wall carpeting

Fireplace

Repairs done as part of larger project. You can in-

clude repair-type work if it is done as part of an extensive

remodeling or restoration job. For example, replacing bro-

ken windowpanes is a repair, but replacing the same win-

dow as part of a project of replacing all the windows in

your home counts as an improvement.

Examples of improvements you CAN’T include in

your basis. You can’t include:

•

Any costs of repairs or maintenance that are neces-

sary to keep your home in good condition but don’t

add to its value or prolong its life. Examples include

painting (interior or exterior), fixing leaks, filling holes

or cracks, or replacing broken hardware.

•

Any costs of any improvements that are no longer part

of your home (for example, wall-to-wall carpeting that

you installed but later replaced).

•

Any costs of any improvements with a life expectancy,

when installed, of less than 1 year.

Exception. The entire job is considered an improve-

ment if items that would otherwise be considered repairs

are done as part of an extensive remodeling or restoration

of your home. For example, if you have a casualty and

your home is damaged, increase your basis by the

amount you spend on repairs that restore the property to

its pre-casualty condition. However, you must adjust your

basis by any amount of insurance reimbursement you re-

ceive or expect to receive for casualty losses. See Work-

sheet 2, line 5.

Energy credits and subsidies. If you included in your

basis the cost of any energy-related improvements (such

as a solar energy system), and you received any tax cred-

its or subsidies related to those improvements, you must

subtract those credits or subsidies from your total basis.

Examples include:

•

1977–1987: Credit for home energy improvements,

•

1992–present: Direct or indirect subsidy from a public

utility for installations or modifications aimed at lower-

ing a home's electricity or natural gas usage or better

managing its energy demand,

•

2006–present: Credit for home energy efficiency im-

provements,

•

2006–present: Credit for qualified solar electric prop-

erty expenditures, qualified solar water heating prop-

erty expenditures, and qualified battery storage prop-

erty expenditures,

•

2006–2007, 2009–present: Credit for energy improve-

ments to non-business properties (windows, skylights,

exterior doors, heat pump, waterheater, biomass

stoves, and boilers), and

•

2023–2032: Credit for home energy audits, involving

an inspection and written report for a main home loca-

ted in the United States (within the meaning of section

121), as conducted and prepared by a certified home

energy auditor.

Home Acquired Through a Trade

Traded for another home. When you trade your home

for a new one, you are treated as having sold your home

and purchased a new one. Your sale price is the trade-in

value you received for your home plus any mortgage or

other debt that the person taking your home as a trade-in

assumed (took over) from you as part of the deal.

Traded for other property. If you paid for your home by

trading other property for it, the starting basis of your

home is usually the fair market value of the property you

traded.

Home Foreclosed, Repossessed, or

Abandoned

If your home was foreclosed on, repossessed, or aban-

doned, you may have ordinary income, gain, or loss. See

Pub. 4681, Canceled Debts, Foreclosures, Reposses-

sions, and Abandonments.

If you used part of your home for business or rental pur-

poses, see Foreclosures and Repossessions in chapter 1

of Pub. 544, for examples of how to figure gain or loss.

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Home Destroyed or Condemned

You have a disposition when your home is destroyed or

condemned and you receive other property or money in

payment, such as insurance or a condemnation award.

This is treated as a sale and you may be able to exclude

all or part of any gain that you have. If your home was de-

stroyed, see Pub. 547. If your home was condemned, see

Pub. 544.

Home Received in Divorce

Home acquired after July 18, 1984. If your former

spouse was the sole owner, your starting basis is the

same as your former spouse's adjusted basis just before

you received the home. If you co-owned the home with

your spouse, add the adjusted basis of your spouse's

half-share in the home to the adjusted basis of your own

half-share to get your starting basis. (In most cases, the

adjusted basis of the two half-shares will be the same.)

The rules apply whether or not you received anything in

exchange for the home.

Home acquired on or before July 18, 1984. Your start-

ing basis will usually be the home's fair market value at the

time you acquired it from your spouse or ex-spouse.

For more information, see Pub. 504, Divorced or Sepa-

rated Individuals. If you or your spouse or ex-spouse lived

in a community property state, see Pub. 555, Community

Property.

Home Received as a Gift

If you received your home as a gift, you should keep re-

cords of the date you received it. Record the adjusted ba-

sis of the donor at the time of the gift and the fair market

value of the home at the time of the gift. Also ask if the do-

nor paid any gift tax. As a general rule, you will use the do-

nor’s adjusted basis at the time of the gift as your basis.

However, see Table 1 below to determine if any excep-

tions to this rule listed in the “IF” column apply.

Table 1. Exceptions to Using a Donor's

Adjusted Basis for a Home Received as a

Gift

IF... AND... THEN...

at the time of

the gift, the

donor’s

adjusted basis

in the home

was more than

the home’s fair

market value,

your usage of the

donor’s adjusted

basis as your basis

results in a loss,

you must use the fair market

value of the home at the time

of the gift as your basis (if

using the fair market value

results in a gain for you, then

you don’t need to recognize

that gain).

at the time of

the gift, the

donor’s

adjusted basis

in the home

was less than

the home’s fair

market value,

the donor paid gift

tax on the gift of the

home,

you figure your basis by

starting with the donor’s

adjusted basis at the time of

the gift and adding the federal

gift tax paid due to the

increase in value of the home

(see Regulations section

1.1015-5 for further details on

this calculation).

Home Inherited

Home acquired from a decedent who died before or

after 2010. If you inherited your home from a decedent

who died before or after 2010, your basis is the fair market

value of the property on the date of the decedent's death

(or the later alternate valuation date chosen by the per-

sonal representative of the estate). If a federal estate tax

return (Form 706) was filed or required to be filed, the

value of the property listed on the estate tax return is your

basis. If Form 706 didn’t have to be filed, your basis in the

home is the same as its appraised value at the date of

death, for purposes of state inheritance or transmission

taxes. See section 1014 for details.

Surviving spouse. If you are a surviving spouse and

you owned your home jointly, your basis in the home will

change. The new basis for the interest your spouse owned

will be its fair market value on the date of death (or alter-

nate valuation date). The basis in your interest will remain

the same. Your new basis in the home is the total of these

two amounts.

If you and your spouse owned the home either as ten-

ants by the entirety or as joint tenants with right of survi-

vorship, you will each be considered to have owned

one-half of the home.

Example. Your jointly owned home (owned as joint

tenants with right of survivorship) had an adjusted basis of

$50,000 on the date of your spouse's death, and the fair

market value on that date was $100,000. Your new basis

in the home is $75,000 ($25,000 for one-half of the adjus-

ted basis plus $50,000 for one-half of the fair market

value).

Community property. In community property states

(Arizona, California, Idaho, Louisiana, Nevada, New Mex-

ico, Texas, Washington, and Wisconsin), each spouse is

usually considered to own half of the community property.

When either spouse dies, the total fair market value of the

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community property becomes the basis of the entire prop-

erty, including the part belonging to the surviving spouse.

For this rule to apply, at least half the value of the com-

munity property interest must be includible in the dece-

dent's gross estate, whether or not the estate must file a

return.

For more information about community property, see

Pub. 555, Community Property.

If you are selling a home in which you acquired an

interest from a decedent who died in 2010, see

Pub. 4895, Tax Treatment of Property Acquired

From a Decedent Dying in 2010, available at IRS.gov/pub/

irs-prior/p4895--2011.pdf, to determine your basis.

Property Used Partly for Business or

Rental

Calculation. If you use property partly as a home and

partly for business or to produce rental income, the treat-

ment of any gain on the sale depends partly on whether

the business or rental part of the property is part of your

home or separate from it. Treatment of any gain also de-

pends on the use during the 5 years leading up to the

sale. To figure the portion of the gain allocated to the pe-

riod of nonresidential use, see Business or rental usage

calculations, later. See also Worksheet 2.

Space within the living area. If the part of your property

used for business or to produce rental income is within

your home, such as a room used as a home office for a

business, you do not need to allocate gain on the sale of

the property between the business part of the property

and the part used as a home. In addition, you do not need

to report the sale of the business or rental part on Form

4797. This is true whether or not you were entitled to claim

any depreciation. However, you cannot exclude the part of

any gain equal to any depreciation allowed or allowable af-

ter May 6, 1997, which must be recaptured and reported

as ordinary income under section 1250(b)(3). Other exam-

ples of space within the living area include a rented spare

bedroom and attic space used as a home office.

Space separate from the living area. You generally

can’t exclude gain on the separate portion of your property

used for business or to produce rental income. Regula-

tions section 1.121-1(e) provides that the use of a sepa-

rate portion of your home for business or rental purposes

does not qualify for exclusion under section 121, and this

may affect your gain or loss calculations. See Regulations

section 1.121-1(e). Examples are:

•

A working farm on which your house was located,

•

A duplex in which you lived in one unit and rented the

other, or

•

A store building with an upstairs apartment in which

you lived.

You can’t exclude gain on the separate part of your

property used for business or to produce rental income

unless you owned and lived in that part of your property

for at least 2 years during the 5-year period ending on the

CAUTION

date of the sale. If you do not meet the use test for the

separate business or rental part of the property, an alloca-

tion of the gain on the sale is required. For this purpose,

you must allocate the basis of the property and the

amount realized between the residential and nonresiden-

tial portions of the property using the same method of allo-

cation that you used to determine depreciation adjust-

ments. Report the sale of the business or rental part on

Form 4797. Note that space formerly used as business or

rental will qualify for exclusion under section 121 if the use

was converted to personal use for a total of 2 years, as

long as the personal use was within the 5 years leading up

to the sale. See Regulations section 1.121-1(a).

Business or rental usage calculations. If you use

property partly as a home and partly for business or to

produce rental income, and the business or rental portion

is not within the home’s living area, you need to make sep-

arate gain/loss calculations for the business and resi-

dence portions of your property. Make three copies of all

pages of Worksheet 2. Label one copy “Total,” one copy

“Home,” and one copy “Business or Rental.”

Complete your “Total” worksheet using the figures for

your property as a whole. Include the total amount you re-

ceived, all of your basis adjustments, etc. Include the cost

of all improvements, whether you made them to the busi-

ness space or the residential space.

Determine your “business or rental percentage,” mean-

ing the percentage of your property that you used for busi-

ness or rental. If you were entitled to take depreciation de-

ductions because you used a portion of your home for

business purposes or as rental property, you can’t exclude

the part of your gain equal to any depreciation allowed or

allowable as a deduction for periods after May 6, 1997.

If you used part of your home for business or rental af-

ter May 6, 1997, you may need to pay back (“recapture”)

some or all of the depreciation you were entitled to take on

your property. “Recapturing” depreciation means you must

include it as ordinary income on your tax return. If you took

depreciation on your home on past tax returns, use the

same business or rental percentage that you used in de-

termining how much depreciation to take. If you didn’t take

depreciation on your home on past tax returns, compare

the size of your business or rental space to the size of the

whole property and express this as a percentage. For ex-

ample, if you have a building with three equal-sized sto-

ries, and you live in the top two stories and use the ground

floor for a store, then you are using

/3 of the property and

your business percentage is 33.3%.

For each number on your “Total” worksheet, figure the

business-related portion of that number and enter it on

your “Business or Rental” worksheet. You may use differ-

ent methods to determine the business portion of different

numbers. Here are the three possible methods and the

circumstances under which each method applies.

•

Dollar-amount method. Where a figure consists of

specific dollar amounts that relate to either the resi-

dence portion or the business portion of the property,

the figure must be broken down by these dollar

amounts. For example, if the figure for improvements

to the property was $100,000, and all of that applied to

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the residence portion, then the business portion of the

improvements would be zero.

•

“100% rule” for depreciation. The first item under

line 5a in Worksheet 2 is a business depreciation item.

Any figure for this item is 100% a business figure.

•

Percentage method. Where a figure applies to the

property as a whole (such as the sale price), the busi-

ness or rental portion is the figure multiplied by the

business portion percentage you calculated earlier.

Use the percentage method for all items that don’t re-

quire the dollar-amount or depreciation methods.

The total you get on line 7 on your “Business” copy of

Worksheet 2 is the gain or loss related to the business or

rental portion of the property you sold.

Next, complete your “Home” worksheet. For each num-

ber, take the number from your “Total” worksheet, subtract

the number from your “Business or Rental” worksheet,

and enter the result in your “Home” worksheet (for exam-

ple, subtract the number on line 1f of the "Business or

Rental" worksheet from the number on line 1f of your "To-

tal" worksheet), and enter the result on your "Home" work-

sheet.

Now figure the totals on your “Home” worksheet. The

total you get on line 7 on the “Home” copy of Worksheet 2

is the gain or loss related to the home portion of the prop-

erty you sold.

Review the results of your “Home” and “Business”

worksheets to determine your next step. When you have

completed each worksheet, you will know whether you

have a gain or loss on each part of your property. It is pos-

sible to have a gain on both parts, a loss on both parts, or

a gain on one part and a loss on the other. For more infor-

mation about using any part of your home for business or

as a rental property, see Pub. 587, Business Use of Your

Home, and Pub. 527, Residential Rental Property.

For detailed information about figuring and report-

ing depreciation associated with the business or

rental use of your home, see Pub. 527.

Complete Worksheet 2. Then see Table 2 to determine

your next steps.

Example. The following example demonstrates sepa-

rate calculations for business and residential uses.

Stacey owns property that consists of a house, a stable

and 35 acres. Stacey uses the stable and 28 acres for

TIP

non-residential purposes for more than 3 years during the

5-year period preceding the sale. Stacey uses the entire

house and the remaining 7 acres as a principal residence

for at least 2 years during the 5-year period preceding the

sale. For periods after May 6, 1997, Stacey claims depre-

ciation deductions of $9,000 for the non-residential use of

the stable. Stacey sells the entire property in 2014, realiz-

ing a gain of $24,000. Stacey has no other section 1231 or

capital gains or losses for 2014.

Because the stable and the 28 acres used in the busi-

ness are separate from the dwelling unit, the allocation

rules apply and Stacey must allocate the basis and

amount realized between the portion of the property used

as a principal residence and the portion used for

non-residential purposes based on their respective FMVs.

Stacey creates three copies of Worksheet 2 and titles

them “Business or Rental,” “Home,” and “Total” to allocate

basis and the amount realized for the different uses of the

property.

Stacey determines that $14,000 of the gain is allocable

to the non-residential-use portion of the property by com-

pleting the copy of Worksheet 2 entitled “Business or

Rental.” Stacey determines that $10,000 of the gain is allo-

cable to the portion of the property used as a residence by

completing the copy of Worksheet 2 entitled “Home.” Sta-

cey must recognize the $14,000 of gain allocable to the

non-residential-use portion of the property ($9,000 of

which is unrecaptured section 1250 gain, and $5,000 of

which is adjusted net capital gain). Stacey reports gain as-

sociated with the non-residential-use portion of the prop-

erty on Form 4797. Stacey may have to complete Form

8949 and Schedule D (Form 1040). See the Instructions

for Form 4797, Form 8949, and Schedule D (Form 1040).

Stacey transfers the gain from the “Home” worksheet to

Worksheet 3, reviews the maximum amount available for

exclusion as figured on Worksheet 1, and determines that

the $10,000 gain from the residence portion is less than

the maximum amount available for exclusion from Work-

sheet 1. The $10,000 gain on the property may be exclu-

ded.

Worksheet 2 is used to figure the adjusted basis of your

home and your gain or (loss). You will figure your taxable

gain (if any), on Worksheet 3, later.

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Worksheet 2. How To Figure Your Gain or Loss

Keep for Your Records

DO NOT use this worksheet to determine your basis if you acquired an interest in your home from a decedent who

died in 2010 and whose executor filed Form 8939. See Home acquired from a decedent who died before or after 2010.

If you have questions as you work through these step-by-step instructions, or want examples of costs that can and

can’t be included, see Basis Adjustments—Details and Exceptions.

•

If married filing jointly, figure gain or loss for both spouses together. If single or married filing separately,

figure gain or loss as an individual.

•

If the home you sold had multiple owners, your gain or loss is the gain or loss on the entire sale multiplied by

your percentage of ownership.

•

If you used any portion of the property for business or rental purposes, see Property Used Partly for

Business or Rental. See also Business or Rental Use of Home.

1. Determine the sale price. This is everything you received for selling your home.

All money (currency, check, wire transfer) ................................................ a.

The fair market value of any other property or services you received ........................ b.

c. The value of any notes, mortgages, or other debts that the buyer agreed to assume (take over)

as part of the sale ...................................................................... c.

Any real estate taxes the buyer paid on your behalf ........................................ d.

e. Any amount you received for granting an option to buy your home, if the option was

exercised .............................................................................. e.

Add lines 1a through 1e. This is your sale price .......................................... f.

•

If you received payment for personal property, DON’T include it in the sale price.

•

If you received payment or reimbursement from your employer because of a job

transfer, DON’T include the payment as part of the selling price. Your employer will include

it as wages in box 1 of your Form W-2.

•

If you received Form 1099-S, the gross proceeds for the sale price should appear in

box 2. If box 4 is checked, the sale price included non-cash payments, and you need to

determine the value of these and add them to the figure in box 2.

•

If you didn’t receive Form 1099-S, refer to your real estate transaction documents for

the total amount you received for your home.

2. Determine your selling expenses. These are the costs directly associated with selling your home.

a. Any sales commissions (for example, a real estate agent's sales commission) ...............

b. Any advertising fees ....................................................................

c. Any legal fees ..........................................................................

d. Any mortgage points or other loan charges you paid that would normally have been the buyer's

responsibility .......................................................................... d.

e. Any other fees or costs to sell your home .................................................

f. Add lines 2a through 2e. These are your selling expenses ................................

3. Figure your “amount realized” (sale price minus selling expenses).

Line 1f minus line 2f .................................................................... 3.

4. Determine your “total basis” (the total amount you invested in your home). This includes what you paid

for your home as well as other money you may have spent that added to its value.

a. The amount you paid for your home (or if you built your home, the cost of the land). Include any

down payment and any amount you borrowed to pay for the home. For cooperative

apartments, include the value of the corporation stock you purchased. If you acquired your

home through inheritance, gift, bargain sale, trade, or anything except a fair market purchase,

see Basis Adjustments—Details and Exceptions .......................................... a.

b. Any settlement fees or closing costs you paid when you bought your home, except for

financing-related costs (such as seller-paid points). The settlement statement should list the

fees related to buying the home. See Basis Adjustments—Details and Exceptions and Fees

and Closing Costs ...................................................................... b.

c. Any real estate taxes or other costs you paid on behalf of the seller you bought your home from

(and for which the seller never paid you back) ............................................. c.

d. Any amounts you spent on construction or other improvements that are still part of your home

at the time of sale (not including costs of maintenance and repairs). See Basis

Adjustments—Details and Exceptions ................................................... d.

e. Any amounts you spent to repair damage to your home or the land on which it sits ...........

f. Any special assessments for local improvements (such as special tax or condominium

association assessments that aren’t merely for repairs or maintenance) ..................... f.

g. Add lines 4a through 4f. This is your total basis ..........................................

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Worksheet 2. How To Figure Your Gain or Loss (continued) Keep for Your Records

5. Determine your “basis adjustments” (any payments, credits, or benefits you may need to deduct from

your basis).

a. Any depreciation you took or were allowed to take for the use of your home for business or

rental purposes ....................................................................... a.

b. Any casualty losses (such as flood or fire damage) you claimed as a deduction on a federal

tax return ............................................................................. b.

c. Any insurance payments you received or expect to receive for casualty losses ..............

d. Any payments you received for granting an easement, conservation restriction, or

right-of-way ........................................................................... d.

e. Any energy credits or subsidies that effectively paid you back for improvements you included

in your total basis, including home energy audits by a certified home energy auditor. See

Basis Adjustments—Details and Exceptions ............................................. e.

f. Any adoption credits you claimed, or any nontaxable payments from an employer-sponsored

adoption assistance program ........................................................... f.

g. Any real estate taxes the seller paid on your behalf (and for which you never paid the seller

back). If you reimburse the seller, it doesn’t affect basis ................................... g.

h. Any mortgage points the seller paid for you when you bought your home, if one of the

following is true ....................................................................... h.

•

You bought your home between January 1, 1991, and April 3, 1994, AND you deducted

the points as home mortgage interest in the year paid, or

•

You bought your home after April 3, 1994 (regardless of whether you deducted the points).

i. Any canceled or forgiven mortgage debt amount that was excluded before January 1, 2026,

due to a bankruptcy or insolvency and that you didn’t have to declare as income. (See Pub.

4681.) ................................................................................ i.

j. Any sales tax you paid on your home (such as for a mobile home or houseboat) and then

claimed as a deduction on a federal tax return ........................................... j.

k. The value of any temporary housing the builder of your home provided for you ..............

•

Use this equation: Contract price × Value of temporary housing ÷ (Value of temporary

housing + Value of new home)

l. Any gain you postponed from the sale of a previous home sold before May 7, 1997 .........

m. Add lines 5a through 5l. This is your basis adjustment ..................................

6. Figure your “adjusted basis” (total basis minus basis adjustments).

Line 4g minus line 5m ................................................................. 6.

•

If your adjusted basis is less than zero and you went through a mortgage workout or

other process resulting in forgiveness or cancellation of mortgage debt (“discharge of

qualified principal residence indebtedness”), don’t count any portion of your canceled

debt that is bringing your basis below zero.

7. Figure your gain or loss (amount realized minus adjusted basis).

Line 3 minus line 6 .................................................................... 7.

•

If the number is negative (adjusted basis is greater than amount realized), you sold your

home at a loss. You can’t deduct this loss, but you don’t need to pay any tax on the money

you received from selling your home. Skip to Reporting Your Home Sale, later.

•

If the number is positive, you sold your home at a gain. Skip to How Much Is Taxable,

later, to see if Worksheet 3 is required.

If this is your separate worksheet for business use, don’t follow guidance on line 7. Report the

gain on Form 4797 because this gain is not excluded under section 121.

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Table 2. Does Your Home or Business Show a Gain or a

Loss? Keep for Your Records

IF... THEN...

your “Home” worksheet

shows a loss,

follow the instructions at the end of line 7, under Worksheet 2 for “If the number is negative.”

your “Home” worksheet

shows a gain,

see How Much Is Taxable? and Worksheet 3 to find out how much of the gain on your “Home”

worksheet is taxable.

your “Business”

worksheet shows a loss,

DON’T follow the instructions at the end of line 7, under Worksheet 2. Instead, report the loss from

your “Business” worksheet on Form 4797, Sales of Business Property. Note. Your loss may be

limited. See the Instructions for Form 4797.

your “Business”

worksheet shows a gain,

you can’t exclude any of the gain shown on your “Business” worksheet. DON’T follow the instructions

at the end of line 7, under Worksheet 2. Instead, report the gain from your “Business” worksheet on

Form 4797.

Business or Rental Use of Home

Nonqualified use of entire property after 2008. If you

fail to meet the requirements to qualify for the $250,000 or

$500,000 exclusion, you may still qualify for a reduced ex-

clusion. If you fail to meet the ownership and use tests, or

if you used a portion of your home for business or rental

purposes during your ownership, this type of usage may

affect your gain or loss calculations.

Gain from the sale or exchange of your main home isn’t

excludable from income if it is allocable to periods of non-

qualified use. Nonqualified use means any period after

2008 where neither you nor your spouse (or your former

spouse) used the property as your main home, with cer-

tain exceptions.

Exceptions. A period of nonqualified use does not in-

clude:

1. Any portion of the 5-year period ending on the date of

the sale or exchange after the last date you or your

spouse (or former spouse) used the property as your

main home;

2. Any period (not to exceed 10 years) during which you

(or your spouse) are serving on qualified official ex-

tended duty:

a. As a member of the uniformed services;

b. As a member of the Foreign Service of the Uni-

ted States; or

c. As an employee of the intelligence community;

and

3. Any other period of temporary absence (not to exceed

an aggregate period of 2 years) due to change of em-

ployment, health conditions, or other unforeseen cir-

cumstances as may be specified by the IRS. See Eli-

gibility Step 5 Exceptions to the Eligibility Test, and

Does Your Home Sale Qualify for the Exclusion of

Gain?, earlier.

Calculation. To figure the portion of the gain allocated to

the period of nonqualified use, see Worksheet 3. For more

information about using any part of your home for busi-

ness or as a rental property, see Pub. 587, Business Use

of Your Home, and Pub. 527, Residential Rental Property.

How Much Is Taxable?

Review of the Eligibility Test. Generally, your home

sale qualifies for the maximum exclusion, if all of the fol-

lowing conditions are true.

•

You didn’t acquire the property through a like-kind ex-

change in the past 5 years.

•

You aren’t subject to the expatriate tax.

•

You owned the home for at least 2 of the last 5 years

and lived in the home for at least 2 (1 if you become

disabled) of the last 5 years leading up to the date of

the sale.*

•

For the 2 years before the date of the current sale, you

didn't sell another home on which you claimed the ex-

clusion.

•

You didn’t use a portion of the home, outside of the liv-

ing area, for business or rental purposes.

•

You didn’t use the entire property for business or

rental purposes, or as a second home, after 2008.

•

The sale doesn’t involve the transfer of vacant land or

a remainder interest.**

*If this condition isn’t met, your home sale may qualify

for a partial exclusion. The sale must involve one of the fol-

lowing events experienced by you, your spouse, a

co-owner, or anyone else for whom the home was her or

his residence: a work-related move, a health-related

move, a death, a divorce, a pregnancy with multiple chil-

dren, a change in employment status, a change in unem-

ployment compensation eligibility, or other unusual event.

**The transfer of vacant land or of a remainder interest

may qualify for the maximum exclusion, but special rules

apply in those situations.

For a step-by-step guide to determining whether your

home sale qualifies for the maximum exclusion, see Does

Your Home Sale Qualify for the Exclusion of Gain? above.

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If you qualify for an exclusion on your home sale, up to

$250,000 ($500,000 if married and filing jointly) of your

gain will be tax free. If your gain is more than that amount,

or if you qualify only for a partial exclusion, then some of

your gain may be taxable. This section contains

step-by-step instructions for figuring out how much of your

gain is taxable. See Worksheet 3, later, for assistance in

determining your taxable gain.

If you determined in Does Your Home Sale Qualify for

the Exclusion of Gain, earlier, that your home sale doesn't

qualify for any exclusion (either full or partial), then your

entire gain is taxable. If you don’t have a gain, you owe no

tax on the sale. In either case, you don’t need to complete

Worksheet 3 and you can skip to Reporting Your Home

Sale, later.

Recapturing Depreciation

If you were entitled to take depreciation deductions be-

cause you used your home for business purposes or as

rental property, you cannot exclude the part of your gain

equal to any depreciation allowed or allowable as a de-

duction for periods after May 6, 1997. If you used all of

your home for business or rental after May 6, 1997, you

may need to pay back (“recapture”) some or all of the de-

preciation you were entitled to take on your property. “Re-

capturing” depreciation means you must include it as ordi-

nary income on your tax return.

Example. Cartier owned and used a house as a main

home from 2015 through 2018. On January 1, 2019, Cart-

ier moved to another state. Cartier rented the home from

that date until April 30, 2021, when Cartier sold it. During

the 5-year period ending on the date of sale (May 1,

2016–April 30, 2021), Cartier owned and lived in the

house for more than 2 years. Because the period of non-

qualified use does not include any part of the 5-year pe-

riod after the last date Cartier lived in the home, there is no

period of nonqualified use. Because Cartier met the own-

ership and use tests, Cartier can exclude gain up to

$250,000. However, Cartier can’t exclude the part of the

gain equal to the depreciation Cartier claimed, or could

have claimed, for renting the house.

Worksheet 3 is used to help you figure taxable gain on

the sale or exchange of your home (if any), and how to re-

port it.

If you completed “Business” and “Home” versions

of your gain/loss worksheet as described in Prop-

erty Used Partly for Business or Rental, earlier,

complete Worksheet 3 only for the “Home” version.

TIP

Worksheet 3. Determine if You Have Taxable Gain Keep for Your Records

If you completed “Business” and “Home” versions of your gain/loss worksheet as described in Property Used Partly for

Business or Rental, earlier, complete this worksheet only for the “Home” version.

Section A. Determine your net gain. Complete this section only if you used any part of your home for

business or rental purposes between May 6, 1997, and the date of sale. Otherwise, skip to Section B.

Step 1 Enter your gain from line 7 of Worksheet 2 ...................................

Step 2 List the total of all depreciation deductions that you took or could have taken for

the use of your home for business or rental purposes between May 7, 1997, and

the date of sale ...........................................................

Step 3 Subtract the sum of Step 2 from the amount listed in Section A, Step 1. This is

your net gain ..............................................................

Section B. Determine your nonqualified use gain. Complete this section only if the following apply: a) During

the time you owned the property there were periods of nonqualified use when neither you nor your spouse

(or your former spouse) used the entire property as your main home; b) the periods of nonqualified use

occurred after 2008; c) the periods of nonqualified use occurred before the last day the entire property was

used as your or your spouse’s (or your former spouse) main home prior to the date of sale. Do not include

any period of nonqualified use that occurred after the last day that you or your spouse (or former spouse)

used the entire property as your main home during the 5-year period prior to the date of sale.* Otherwise,

skip to Section C.

*Note. If the period of non-use was 1) for an aggregate of 2 years or less and due to a change in employment, a health

condition, or other "unforeseen circumstance" described in Does Your Home Qualify for a Partial Exclusion of Gain,

earlier; or 2) for 10 years or less and due to a "stop the clock" exception for certain military, intelligence, and Peace

Corps personnel described in Service, Intelligence, and Peace Corps Personnel, earlier, then you may skip Section B.

Step 1 Enter the amount from Section A, Step 1 or, if you skipped Section A, your gain

from line 7 of Worksheet 2 .................................................

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Step 2 Enter the total number of days after 2008 and before the date of sale that neither

you nor your spouse (or former spouse) used the entire home as a main

residence. Do not include any days that occurred after the last day that you or

your spouse (or former spouse) used the entire property as your main home

during the 5-year period prior to the date of sale. This number is your non-use

days .....................................................................

Step 3 Enter the total number of days you owned your home (counting all days, not just

days after 2008). This number is your number of days owned .................

Step 4 Divide the non-use days by the days owned. This number is your non-residence

factor ....................................................................

Step 5 Multiply the decimal from Section B, Step 4, by the amount listed in Section B,

Step 1. This number is your nonqualified use gain ............................

Section C. Determine your gain that is eligible for exclusion.

IF... THEN your gain that is eligible for exclusion is …

you skipped Sections A

and B

your gain from line 7, under Worksheet 2.

you completed Section

A but skipped Section B

your net gain, from Section A, Step 3.

you completed Section

B (regardless of whether

you completed Section

your gain from line 7, under Worksheet 2 less your nonqualified use gain, from Section B,

Step 5.

Your gain that is eligible for exclusion is $ _______________

Section D. Determine if you have taxable gain.

IF... THEN …

your gain that is eligible

for exclusion from

Section C is less than or

equal to your exclusion

limit from Worksheet 1,

Section C

your gain that is eligible for exclusion from your income is not to be reported on your tax

return. The Reporting Your Home Sale section only applies to your nonqualified use gain.

your gain that is eligible

for exclusion from

Section C is greater than

your exclusion limit from

Worksheet 1, Section C

some of your gain isn’t excludable, and you may owe tax on it. See Reporting Your Home

Sale for instructions on how to report the gain on your tax return.

Reporting Your Home Sale

This section tells you how to report taxable gain, take de-

ductions relating to your home sale, and report income

other than the gain that you may have received from your

home sale.

This section also covers special circumstances that ap-

ply to some home sellers.

What records to keep. Any time you buy real es-

tate, you should keep records to document the

property's adjusted basis. In general, keep these

records until 3 years after the due date for your tax return

for the year in which you sold your home.

TIP

Reporting Gain or Loss on Your Home

Sale

Determine whether you need to report the gain from

your home. You need to report the gain if ANY of the fol-

lowing is true.

•

You have taxable gain on your home sale (or on the

residential portion of your property if you made sepa-

rate calculations for home and business) and don’t

qualify to exclude all of the gain.

•

You received a Form 1099-S. If so, you must report the

sale on Form 8949 even if you have no taxable gain to

report. See Instructions for Form 8949 and Instruc-

tions for Schedule D (Form 1040) for more details.

•

You wish to report your gain as a taxable gain even

though some or all of it is eligible for exclusion. You

may wish to do this if, for example, you plan to sell an-

other main home within the next 2 years and are likely

to receive a larger gain from the sale of that property. If

you later choose to report, rather than exclude, your

taxable gain, you can undo that choice by filing an

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amended return within 3 years of the due date of your

return for the year of the sale, excluding extensions.

If NONE of the three bullets above is true, you don’t

need to report your home sale on your tax return. If you

didn’t make separate home and business calculations on

your property, skip to Reporting Deductions Related to

Your Home Sale, later.

If ANY of the three bullets above is true, skip to Deter-

mine whether your home sale is an installment sale, later.

If you made separate gain/loss calculations for

business and residence portions of your property,

you may have to use Form 4797 to report the sale of the

business or rental part. See Property Used Partly for Busi-

ness or Rental, earlier.

Determine whether your home sale is an installment

sale. If you finance the buyer's purchase of your home

(you hold a note, mortgage, or other financial agreement),

you probably have an installment sale. You may be able to

report any non-excludable gain on an installment basis.

Use Form 6252, Installment Sale Income, to report the

sale.

For more information, see Pub. 537, Installment Sales.

Report any interest you receive from the buyer. If the

buyer is making payments to you over time (as when you

provide seller financing), then you must generally report

part of each payment as interest on your tax return. Report

the interest portion of the payment as ordinary income on

Form 1040 or 1040-SR, line 2b, or Schedule NEC (Form

1040-NR) if a nonresident alien. If the buyer is using the

property as a first or second home, also report the interest

on Schedule B (Form 1040), Interest and Ordinary Divi-

dends, and provide the buyer's name, address, and social

security number. If you don’t show the buyer’s name, ad-

dress, and SSN you may have to pay a $50 penalty.

If you’re a nonresident or resident alien who

doesn’t have and isn’t eligible to get a social security

number, you may be issued an individual taxpayer identi-

fication number (ITIN). If you don’t have an ITIN, apply for

one by filing Form W-7, Application for IRS Individual Tax-

payer Identification Number. If needed, a nonresident or

resident alien buyer can apply for an ITIN as well.

Complete Form 8949, Sales and Other Dispositions

of Capital Assets. Use Form 8949 to report gain from

the sale or disposition of the personal-use portion of your

home if you can’t exclude the gain. If you received Form

1099-S, report the transaction on Form 8949. See the In-

structions for Form 8949.

If you have gain that can’t be excluded, you must

generally report it on Form 8949, Sales and Other

Dispositions of Capital Assets, and Schedule D

(Form 1040), Capital Gains and Losses. Report the sale

on Part I or Part II of Form 8949 as a short-term or

long-term transaction, depending on how long you owned

the home. In addition, you may be able to temporarily de-

fer capital gains invested in a Qualified Opportunity Fund

(QOF). You may also be able to permanently exclude cap-

ital gains from the sale or exchange of an investment in a

TIP

QOF if the investment is held for at least 10 years. For

more information, see the Instructions for Form 8949.

Complete Schedule D (Form 1040), Capital Gains and

Losses. Using the information on Form 8949, report on

Schedule D (Form 1040) the gain or loss on your home as

a capital gain or loss. Follow the instructions for Sched-

ule D when completing the form.

If you have any taxable gain from the sale of your home,

you may have to increase your withholding or make esti-

mated tax payments. See Pub. 505, Tax Withholding and

Estimated Tax.

Reporting Deductions Related to Your

Home Sale

If you aren’t itemizing deductions on your return for the

year in which you sold your home, skip to Reporting Other

Income Related to Your Home Sale, later.

There is no tax deduction for transfer taxes, stamp

taxes, or other taxes, fees, and charges you paid when

you sold your home. However, if you paid these amounts

as the seller, you can treat these taxes and fees as selling

expenses. If you pay these amounts as the buyer, include

them in your cost basis of the property.

Determine the amount of real estate tax deductions

associated with your home sale. Depending on your

circumstances, you may need to figure your real estate tax

deductions differently. See the discussion that follows for

more information.

If you didn’t receive a Form 1099-S, use the follow-

ing method to compute your real estate tax deduction,

which may be different from the amount of real estate tax

you actually paid.

•

Divide the number of days you owned the property

during the year of sale, not counting the date of sale,

by 365 (or 366 for a leap year).

•

Multiply that figure by the amount of real estate tax

due on the home during the 12-month billing cycle that

contains the date of sale. The result is the amount of

real estate tax you can deduct as an itemized deduc-

tion.

Example. The real estate tax on Jackie and Pat

White's home was $620 for the year. Their real property

tax year was the calendar year, with payment due August

3, 2023. They sold the home on May 6, 2023. Jackie and

Pat are considered to have paid a proportionate share of

the real estate taxes on the home even though they didn’t

actually pay them to the taxing authority.

Jackie and Pat owned their home during the 2023 real

property tax year for 125 days (January 1 to May 5, the

day before the sale). They figure their deduction for taxes

as follows.

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1. Total real estate taxes for the real property tax year .. $620

2. Number of days in the real property tax year that you

owned the property ......................

125

3. Divide line 2 by 365 (366 if leap year) ........... 0.342

4. Multiply line 1 by line 3. This is your deduction. Enter it

on line 5b of Schedule A (Form 1040) ...........

$212

Since the buyers paid all of the taxes, Jackie and Pat also

include the $212 in the home's selling price. The buyers

add the $212 to their basis in the home. The buyers can

deduct $408 ($620 – $212) as an itemized deduction, the

taxes for the part of the year they owned the home.

If you received a Form 1099-S, start with the amount

of real estate tax you actually paid in the year of sale. Sub-

tract the buyer's share of real estate tax as shown in

box 6. The result is the amount you can use in figuring

your itemized deductions.

If you didn’t already deduct all your mortgage

points on an earlier tax return, you may be able to de-

duct them on your tax return for the year of sale. See Pub.

936, Home Mortgage Interest Deduction.

Report on Schedule A (Form 1040), Itemized Deduc-

tions, any itemized real estate deduction. Follow the

Instructions for Schedule A when completing the form.

Reporting Other Income Related to

Your Home Sale

Report as ordinary income on Form 1040, 1040-SR,

or 1040-NR any amounts received from selling per-

sonal property. If you sold furniture, drapes, lawn equip-

ment, a washer/dryer, or other property that wasn’t a per-

manent part of your home, report the amount you received

for the items as ordinary income. Report this amount on

Schedule 1 (Form 1040), line 8z, or Schedule NEC (Form

1040-NR) if a nonresident alien. The selling price of your

home doesn’t include amounts you received for personal

property sold with your home.

Report as ordinary income on Form 1040, 1040-SR,

or 1040-NR any amounts received for sales of ex-

pired options to purchase your property. If you gran-

ted someone an option to buy your home and it expired in

the year of sale, report the amount you received for the

option as ordinary income. Report this amount on Sched-

ule 1 (Form 1040), line 8z, or Schedule NEC (Form

1040-NR) if a nonresident alien.

Report as ordinary income on Form 1040, 1040-SR,

or 1040-NR applicable canceled or forgiven mort-

gage debt. If you went through a mortgage workout, fore-

closure, or other process in which a lender forgave or can-

celed mortgage debt on your home, then you must

generally report the amount of forgiven or canceled debt

as income on your tax return. However, if you had a written

agreement for the forgiveness of the debt in place before

January 1, 2026, then you might be able to exclude the

forgiven amount from your income. For more information,

see Pub. 4681, Canceled Debts, Foreclosures, Reposses-

sions, and Abandonments.

Paying Back Credits and Subsidies

If you received any homebuyer credits or federal mortgage

subsidies, you may have to pay back (“recapture”) some

or all of the amount by increasing your tax payment.

Determine any amounts you may have claimed as a

first-time homebuyer tax credit. If you bought your

home in 2008, you must pay back the credit unless you

qualify for an exception.

See Form 5405, Repayment of the First-Time Home-

buyer Credit, to find out how much to pay back, or if you

qualify for any exceptions. If you do have to repay the

credit, file Form 5405 with your tax return.

Determine any amounts you may have received in

federal mortgage subsidies in the 9 years leading up

to the date of sale. If you financed your home under a

federally subsidized program (loans from tax-exempt

qualified mortgage bonds or loans with mortgage credit

certificates), you may have to recapture all or part of the

benefit you received from that program upon the sale or

other transfer of ownership of your home. You recapture

the benefit by increasing your federal income tax for the

year of the sale. You may have to pay this recapture tax

even if you can exclude your gain from income under the

rules discussed earlier; that exclusion doesn’t affect the

recapture tax.

See Form 8828, Recapture of Federal Mortgage Sub-

sidy, to find out how much to repay, or whether you qualify

for any exceptions.

If you did receive any federal mortgage subsidies, you

must file Form 8828 with your tax return whether you sold

your home at a loss or a gain. If you had a loss, you won't

have to pay back any subsidy.

How To Get Tax Help

If you have questions about a tax issue; need help prepar-

ing your tax return; or want to download free publications,

forms, or instructions, go to IRS.gov to find resources that

can help you right away.

Preparing and filing your tax return. After receiving all

your wage and earnings statements (Forms W-2, W-2G,

1099-R, 1099-MISC, 1099-NEC, etc.); unemployment

compensation statements (by mail or in a digital format) or

other government payment statements (Form 1099-G);

and interest, dividend, and retirement statements from

banks and investment firms (Forms 1099), you have sev-

eral options to choose from to prepare and file your tax re-

turn. You can prepare the tax return yourself, see if you

qualify for free tax preparation, or hire a tax professional to

prepare your return.

Free options for tax preparation. Your options for pre-

paring and filing your return online or in your local com-

munity, if you qualify, include the following.

•

Free File. This program lets you prepare and file your

federal individual income tax return for free using

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software or Free File Fillable Forms. However, state

tax preparation may not be available through Free File.

Go to IRS.gov/FreeFile to see if you qualify for free on-

line federal tax preparation, e-filing, and direct deposit

or payment options.

•

VITA. The Volunteer Income Tax Assistance (VITA)

program offers free tax help to people with

low-to-moderate incomes, persons with disabilities,

and limited-English-speaking taxpayers who need

help preparing their own tax returns. Go to IRS.gov/

VITA, download the free IRS2Go app, or call

800-906-9887 for information on free tax return prepa-

ration.

•

TCE. The Tax Counseling for the Elderly (TCE) pro-

gram offers free tax help for all taxpayers, particularly

those who are 60 years of age and older. TCE volun-

teers specialize in answering questions about pen-

sions and retirement-related issues unique to seniors.

Go to IRS.gov/TCE or download the free IRS2Go app

for information on free tax return preparation.

•

MilTax. Members of the U.S. Armed Forces and quali-

fied veterans may use MilTax, a free tax service of-

fered by the Department of Defense through Military

OneSource. For more information, go to

MilitaryOneSource (MilitaryOneSource.mil/MilTax).

Also, the IRS offers Free Fillable Forms, which can

be completed online and then e-filed regardless of in-

come.

Using online tools to help prepare your return. Go to

IRS.gov/Tools for the following.

•

The Earned Income Tax Credit Assistant (IRS.gov/

EITCAssistant) determines if you’re eligible for the

earned income credit (EIC).

•

The Online EIN Application (IRS.gov/EIN) helps you

get an employer identification number (EIN) at no

cost.

•

The Tax Withholding Estimator (IRS.gov/W4App)

makes it easier for you to estimate the federal income

tax you want your employer to withhold from your pay-

check. This is tax withholding. See how your withhold-

ing affects your refund, take-home pay, or tax due.

•

The First-Time Homebuyer Credit Account Look-up

(IRS.gov/HomeBuyer) tool provides information on

your repayments and account balance.

•

The Sales Tax Deduction Calculator (IRS.gov/

SalesTax) figures the amount you can claim if you

itemize deductions on Schedule A (Form 1040).

Getting answers to your tax questions. On

IRS.gov, you can get up-to-date information on

current events and changes in tax law.

•

IRS.gov/Help: A variety of tools to help you get an-

swers to some of the most common tax questions.

•

IRS.gov/ITA: The Interactive Tax Assistant, a tool that

will ask you questions and, based on your input, pro-

vide answers on a number of tax topics.

•

IRS.gov/Forms: Find forms, instructions, and publica-

tions. You will find details on the most recent tax

changes and interactive links to help you find answers

to your questions.

•

You may also be able to access tax information in your

e-filing software.

Need someone to prepare your tax return? There are

various types of tax return preparers, including enrolled

agents, certified public accountants (CPAs), accountants,

and many others who don’t have professional credentials.

If you choose to have someone prepare your tax return,

choose that preparer wisely. A paid tax preparer is:

•

Primarily responsible for the overall substantive accu-

racy of your return,

•

Required to sign the return, and

•

Required to include their preparer tax identification

number (PTIN).

Although the tax preparer always signs the return,

you're ultimately responsible for providing all the

information required for the preparer to accurately

prepare your return and for the accuracy of every item re-

ported on the return. Anyone paid to prepare tax returns

for others should have a thorough understanding of tax

matters. For more information on how to choose a tax pre-

parer, go to Tips for Choosing a Tax Preparer on IRS.gov.

Employers can register to use Business Services On-

line. The Social Security Administration (SSA) offers on-

line service at SSA.gov/employer for fast, free, and secure

W-2 filing options to CPAs, accountants, enrolled agents,

and individuals who process Form W-2, Wage and Tax

Statement, and Form W-2c, Corrected Wage and Tax

Statement.

IRS social media. Go to IRS.gov/SocialMedia to see the

various social media tools the IRS uses to share the latest

information on tax changes, scam alerts, initiatives, prod-

ucts, and services. At the IRS, privacy and security are our

highest priority. We use these tools to share public infor-

mation with you. Don’t post your social security number

(SSN) or other confidential information on social media

sites. Always protect your identity when using any social

networking site.

The following IRS YouTube channels provide short, in-

formative videos on various tax-related topics in English,

Spanish, and ASL.

•

Youtube.com/irsvideos.

•

Youtube.com/irsvideosmultilingua.

•

Youtube.com/irsvideosASL.

Watching IRS videos. The IRS Video portal

(IRSVideos.gov) contains video and audio presentations

for individuals, small businesses, and tax professionals.

CAUTION

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Online tax information in other languages. You can

find information on IRS.gov/MyLanguage if English isn’t

your native language.

Free Over-the-Phone Interpreter (OPI) Service. The

IRS is committed to serving taxpayers with limited-English

proficiency (LEP) by offering OPI services. The OPI Serv-

ice is a federally funded program and is available at Tax-

payer Assistance Centers (TACs), most IRS offices, and

every VITA/TCE tax return site. The OPI Service is acces-

sible in more than 350 languages.

Accessibility Helpline available for taxpayers with

disabilities. Taxpayers who need information about ac-

cessibility services can call 833-690-0598. The Accessi-

bility Helpline can answer questions related to current and

future accessibility products and services available in al-

ternative media formats (for example, braille, large print,

audio, etc.). The Accessibility Helpline does not have ac-

cess to your IRS account. For help with tax law, refunds, or

account-related issues, go to IRS.gov/LetUsHelp.

Note. Form 9000, Alternative Media Preference, or

Form 9000(SP) allows you to elect to receive certain types

of written correspondence in the following formats.

•

Standard Print.

•

Large Print.

•

Braille.

•

Audio (MP3).

•

Plain Text File (TXT).

•

Braille Ready File (BRF).

Disasters. Go to IRS.gov/DisasterRelief to review the

available disaster tax relief.

Getting tax forms and publications. Go to IRS.gov/

Forms to view, download, or print all the forms, instruc-

tions, and publications you may need. Or, you can go to

IRS.gov/OrderForms to place an order.

Getting tax publications and instructions in eBook

format. Download and view most tax publications and in-

structions (including the Instructions for Form 1040) on

mobile devices as eBooks at IRS.gov/eBooks.

IRS eBooks have been tested using Apple's iBooks for

iPad. Our eBooks haven’t been tested on other dedicated

eBook readers, and eBook functionality may not operate

as intended.

Access your online account (individual taxpayers

only). Go to IRS.gov/Account to securely access infor-

mation about your federal tax account.

•

View the amount you owe and a breakdown by tax

year.

•

See payment plan details or apply for a new payment

plan.

•

Make a payment or view 5 years of payment history

and any pending or scheduled payments.

•

Access your tax records, including key data from your

most recent tax return, and transcripts.

•

View digital copies of select notices from the IRS.

•

Approve or reject authorization requests from tax pro-

fessionals.

•

View your address on file or manage your communica-

tion preferences.

Get a transcript of your return. With an online account,

you can access a variety of information to help you during

the filing season. You can get a transcript, review your

most recently filed tax return, and get your adjusted gross

income. Create or access your online account at IRS.gov/

Account.

Tax Pro Account. This tool lets your tax professional

submit an authorization request to access your individual

taxpayer IRS online account. For more information, go to

IRS.gov/TaxProAccount.

Using direct deposit. The safest and easiest way to re-

ceive a tax refund is to e-file and choose direct deposit,

which securely and electronically transfers your refund di-

rectly into your financial account. Direct deposit also

avoids the possibility that your check could be lost, stolen,

destroyed, or returned undeliverable to the IRS. Eight in

10 taxpayers use direct deposit to receive their refunds. If

you don’t have a bank account, go to IRS.gov/

DirectDeposit for more information on where to find a bank

or credit union that can open an account online.

Reporting and resolving your tax-related identity

theft issues.

•

Tax-related identity theft happens when someone

steals your personal information to commit tax fraud.

Your taxes can be affected if your SSN is used to file a

fraudulent return or to claim a refund or credit.

•

The IRS doesn’t initiate contact with taxpayers by

email, text messages (including shortened links), tele-

phone calls, or social media channels to request or

verify personal or financial information. This includes

requests for personal identification numbers (PINs),

passwords, or similar information for credit cards,

banks, or other financial accounts.

•

Go to IRS.gov/IdentityTheft, the IRS Identity Theft

Central webpage, for information on identity theft and

data security protection for taxpayers, tax professio-

nals, and businesses. If your SSN has been lost or

stolen or you suspect you’re a victim of tax-related

identity theft, you can learn what steps you should

take.

•

Get an Identity Protection PIN (IP PIN). IP PINs are

six-digit numbers assigned to taxpayers to help pre-

vent the misuse of their SSNs on fraudulent federal in-

come tax returns. When you have an IP PIN, it pre-

vents someone else from filing a tax return with your

SSN. To learn more, go to IRS.gov/IPPIN.

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Ways to check on the status of your refund.

•

Go to IRS.gov/Refunds.

•

Download the official IRS2Go app to your mobile de-

vice to check your refund status.

•

Call the automated refund hotline at 800-829-1954.

The IRS can’t issue refunds before mid-February

for returns that claimed the EIC or the additional

child tax credit (ACTC). This applies to the entire

refund, not just the portion associated with these credits.

Making a tax payment. Payments of U.S. tax must be

remitted to the IRS in U.S. dollars. Digital assets are not

accepted. Go to IRS.gov/Payments for information on how

to make a payment using any of the following options.

•

IRS Direct Pay: Pay your individual tax bill or estimated

tax payment directly from your checking or savings ac-

count at no cost to you.

•

Debit Card, Credit Card, or Digital Wallet: Choose an

approved payment processor to pay online or by

phone.

•

Electronic Funds Withdrawal: Schedule a payment

when filing your federal taxes using tax return prepara-

tion software or through a tax professional.

•

Electronic Federal Tax Payment System: Best option

for businesses. Enrollment is required.

•

Check or Money Order: Mail your payment to the ad-

dress listed on the notice or instructions.

•

Cash: You may be able to pay your taxes with cash at

a participating retail store.

•

Same-Day Wire: You may be able to do same-day

wire from your financial institution. Contact your finan-

cial institution for availability, cost, and time frames.

Note. The IRS uses the latest encryption technology to

ensure that the electronic payments you make online, by

phone, or from a mobile device using the IRS2Go app are

safe and secure. Paying electronically is quick, easy, and

faster than mailing in a check or money order.

What if I can’t pay now? Go to IRS.gov/Payments for

more information about your options.

•

Apply for an online payment agreement (IRS.gov/

OPA) to meet your tax obligation in monthly install-

ments if you can’t pay your taxes in full today. Once

you complete the online process, you will receive im-

mediate notification of whether your agreement has

been approved.

•

Use the Offer in Compromise Pre-Qualifier to see if

you can settle your tax debt for less than the full

amount you owe. For more information on the Offer in

Compromise program, go to IRS.gov/OIC.

Filing an amended return. Go to IRS.gov/Form1040X

for information and updates.

CAUTION

Checking the status of your amended return. Go to

IRS.gov/WMAR to track the status of Form 1040-X amen-

ded returns.

It can take up to 3 weeks from the date you filed

your amended return for it to show up in our sys-

tem, and processing it can take up to 16 weeks.

Understanding an IRS notice or letter you’ve re-

ceived. Go to IRS.gov/Notices to find additional informa-

tion about responding to an IRS notice or letter.

Responding to an IRS notice or letter. You can now

upload responses to all notices and letters using the

Document Upload Tool. For notices that require additional

action, taxpayers will be redirected appropriately on

IRS.gov to take further action. To learn more about the

tool, go to IRS.gov/Upload.

Note. You can use Schedule LEP (Form 1040), Re-

quest for Change in Language Preference, to state a pref-

erence to receive notices, letters, or other written commu-

nications from the IRS in an alternative language. You may

not immediately receive written communications in the re-

quested language. The IRS’s commitment to LEP taxpay-

ers is part of a multi-year timeline that began providing

translations in 2023. You will continue to receive communi-

cations, including notices and letters, in English until they

are translated to your preferred language.

Contacting your local TAC. Keep in mind, many ques-

tions can be answered on IRS.gov without visiting a TAC.

Go to IRS.gov/LetUsHelp for the topics people ask about

most. If you still need help, TACs provide tax help when a

tax issue can’t be handled online or by phone. All TACs

now provide service by appointment, so you’ll know in ad-

vance that you can get the service you need without long

wait times. Before you visit, go to IRS.gov/TACLocator to

find the nearest TAC and to check hours, available serv-

ices, and appointment options. Or, on the IRS2Go app,

under the Stay Connected tab, choose the Contact Us op-

tion and click on “Local Offices.”

The Taxpayer Advocate Service (TAS)

Is Here To Help You

What Is TAS?

TAS is an independent organization within the IRS that

helps taxpayers and protects taxpayer rights. TAS strives

to ensure that every taxpayer is treated fairly and that you

know and understand your rights under the Taxpayer Bill

of Rights.

How Can You Learn About Your Taxpayer

Rights?

The Taxpayer Bill of Rights describes 10 basic rights that

all taxpayers have when dealing with the IRS. Go to

TaxpayerAdvocate.IRS.gov to help you understand what

these rights mean to you and how they apply. These are

your rights. Know them. Use them.

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What Can TAS Do for You?

TAS can help you resolve problems that you can’t resolve

with the IRS. And their service is free. If you qualify for

their assistance, you will be assigned to one advocate

who will work with you throughout the process and will do

everything possible to resolve your issue. TAS can help

you if:

•

Your problem is causing financial difficulty for you,

your family, or your business;

•

You face (or your business is facing) an immediate

threat of adverse action; or

•

You’ve tried repeatedly to contact the IRS but no one

has responded, or the IRS hasn’t responded by the

date promised.

How Can You Reach TAS?

TAS has offices in every state, the District of Columbia,

and Puerto Rico. To find your advocate’s number:

•

Go to TaxpayerAdvocate.IRS.gov/Contact-Us;

•

Download Pub. 1546, The Taxpayer Advocate Service

Is Your Voice at the IRS, available at IRS.gov/pub/irs-

pdf/p1546.pdf;

•

Call the IRS toll free at 800-TAX-FORM

(800-829-3676) to order a copy of Pub. 1546;

•

Check your local directory; or

•

Call TAS toll free at 877-777-4778.

How Else Does TAS Help Taxpayers?

TAS works to resolve large-scale problems that affect

many taxpayers. If you know of one of these broad issues,

report it to TAS at IRS.gov/SAMS. Be sure to not include

any personal taxpayer information.

Low Income Taxpayer Clinics (LITCs)

LITCs are independent from the IRS and TAS. LITCs rep-

resent individuals whose income is below a certain level

and who need to resolve tax problems with the IRS. LITCs

can represent taxpayers in audits, appeals, and tax collec-

tion disputes before the IRS and in court. In addition,

LITCs can provide information about taxpayer rights and

responsibilities in different languages for individuals who

speak English as a second language. Services are offered

for free or a small fee. For more information or to find an

LITC near you, go to the LITC page at

TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134,

Low Income Taxpayer Clinic List, at IRS.gov/pub/irs-pdf/

p4134.pdf.

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To help us develop a more useful index, please let us know if you have ideas for index entries.

See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Index

Armed Service Members 4

Assistance (See Tax help)

Automatic disqualification 3

Away from home 4

Basis adjustments:

Adjusted basis 8

Business or Rental use of home 12

Capital Gains:

Qualified Opportunity Funds 2

Closing costs 9

Community property:

Basis determination 11

Condemnation:

Basis 11

Sale price 11

Condominium:

As main home 3

Cooperative apartment:

As main home 3

Death of Spouse 4

Depreciation:

Home used for business or rental

purposes 17

Destruction:

Basis 11

Sale price 11

Disability:

Mentally disabled 4

Physically disabled 4

Divorce 11

Eligibility test 3

Energy:

Credit 10

Subsidies 10

exclusion of canceled or forgiven mortgage

debt 2

Exclusion of gain 3

Federal mortgage subsidies 20

First-time homebuyer tax credit 20

Form 8949 19

Future developments 1

Gain or loss 8

Exclusion of gain 3

Home acquired through a trade 10

Home inherited 11

Home received as gift 11

Home sale:

Reporting requirements 18

Houseboat:

As main home 3

Improvements 9

Inheritance:

Home received as 11

Installment sale 19

Interest reporting 19

Look-back requirement 4

Look-back requirement exceptions 4

Main home:

Defined 3

Factors used to determine 3

Missing children, photographs of 1

Mobile home:

As main home 3

More than one home 3

Nonresident or resident alien 19

Ownership 3

Ownership requirement 3

Paying back credits 20

Paying back subsidies 20

Peace Corps Members 4

Publications (See Tax help)

Remodeling 10

Rental use of home 16

Repairs 10

Reporting home sale deductions 19

Reporting other income related to home

sale 20

Reporting taxable gain or loss 18

Residence 3

Residence requirement 3

Seller costs 9

Settlement fees 9

Spouse:

Death of (See Surviving spouse)

Surviving spouse:

Basis determination 11

Tax help 20

Taxable gain 16

Transfer of home 3

Widowed Taxpayers 4

Publication 523 (2023) 25