At tax time, you have to be cognizant of any sales of houses or other real estate that you made during the past year, as they can have tax implications. You’ll need to report the sale of your home or other structures, including land (with added improvements or not) and interest in condos and cooperative housing projects. Most real estate sales are included, though if you sold a mobile home and it wasn’t situated on a permanent foundation, the sale is exempt.
Form 1099-S
Real estate sales are reported on a Form 1099-S. After the closing of the sale, the agent will file a 1099-S with the IRS. If you did not use an agent, your mortgage lender, broker, or the first person listed on the ownership transfer documents is responsible for filing the 1099. The Form 1099-S reports all those involved in the sale and the proceeds, including who received the money as a result of the sale.
Exclusions
If you sold your primary residence which you both owned and lived in for at least two of the five years prior to the sale, you won’t have to include any profit or gain from the sale when you calculate your taxable income. The exclusion amount is limited at $250,000 for single filers, and up to $500,000 for married filing jointly. The gain exclusion has to be on only one house and not on rental property, however the exclusion applies to individual homes and condos and co-ops.
Other Exemptions
Military servicemembers, disabled homeowners, or those who had a home destroyed by a natural disaster or accidental cause are subject to special exemptions. Form 8949 will help determine which exemptions apply and will calculate whether the transaction is a gain or a loss. Gains above the exemption threshold will be taxed, but losses can’t be deducted. If you financed the sale, you’ll need to report principal and interest payments.
Capital Gains
If you have a gain to report, you’ll have to complete a Form 8949, documenting the transaction along with a Schedule D to calculate the tax on capital gains. Whether the gain is considered long-term or short-term depends on how long you owned the original property for. The exemption limits for gains is $250,000 single and $500,000 married, as any amount above this will need to be reported on Line 13 on the Form 1040.
