Selling a house or any other real estate can be complicated and may have tax implications for you. You must report the sale of your home or other buildings, any land whether it has improvements or not, or any interest in a condominium or cooperative housing project. Almost any real estate sale is covered, but mobile homes not on a permanent foundation are excluded.
1099-S Reports Sale
A 1099-S is used to report the sale. The agent who closes the real estate transaction must file the 1099-S with the Internal Revenue Service. If there is no closer, the 1099-S must be filed by a mortgage lender, any broker who participated in the deal or the person who acquires the greatest interest in the property or is listed first on the ownership transfer documents. The 1099-S lists those involved in the sale and its gross proceeds -- who got the money from the sale.
You can exclude from your income tax any gain or profit from the sale of your home if you owned it and lived there for at least two years in the preceding five years. You can exclude up to $250,000, or $500,000 if you’re married and filing a joint return. You can exclude gain on only one house and not on any rental property you sell. The exclusions apply to both individual houses and condominium or cooperative apartments.
There are special exemptions for military service members, people with disabilities, or owners whose home was destroyed by some accident or natural disaster. You'll have to complete a Form 8949 to document the transaction, whether it is a gain or a loss. You'll be taxed on any gain above the exempt amount but cannot deduct any loss. If you finance the sale yourself, you'll have to report both principal and interest payments.
If you report a gain, you need to complete Form 8949 with details of the transaction and a Schedule D to compute the tax on capital gains. You will figure either long- or short-term capital gains, depending on how long you owned the property. This applies only to gains above the exempt limits of $250,000 single or $500,000 married. Any gain above the excluded amount will be reported as taxable income on Line 13 of your Form 1040.
- Internal Revenue Service: Instructions for Form 1099-S
- Internal Revenue Service: Publication 523
- Turbo Tax: Information About Form 1099-S
- Internal Revenue Service: Reporting Gains and Losses
- Internal Revenue Service: Instructions for Schedule D (and Form 8949)
- Internal Revenue Service: Instructions for Schedule A
- Turbo Tax: What Is Form 1099-S?
- How Do Two Unmarried People Claim Mortgage Interest for Tax Purposes?
- What Is a Perfected Mortgage?
- Does Paying My Mortgage a Few Days Early Reduce the Interest?
- How to Claim Mortgage Interest With IRS When Money Is Borrowed From a Private Party
- What to Do When a Mortgage Is Paid in Full
- What Is a Mortgage Deferment?
- Will the IRS Refund My Mortgage Interest?
- Is Mortgage Interest Included in the Property Basis?
- How to Buy a House From a Seller Who Will Hold a Second Mortgage
- Does Mortgage Interest Help on Taxes?