When Gain Must Be Reported

Proceeds from the sale of a main home that meets the ownership and use tests must be reported if the gain is greater than the taxpayer's allowed exclusion. Gain from the sale of a home that is not the taxpayer's main home will generally have to be reported as income.

In both cases, the gain is taxable gain. The sale must be reported on Form 8949 and Schedule D. If the home was used for business purposes or as rental property, the gain would be reported on Form 4797 and the taxpayer should be referred to a professional tax preparer.

If the amount realized is less than the adjusted basis, the difference is a loss. A loss on the sale of a main home cannot be deducted. However, a taxpayer who received Form 1099-S for a loss on the sale of a main home must report the loss on Form 8949 and Schedule D even though the loss is not deductible. Reporting the transaction should prevent the taxpayer from receiving a notice from the IRS.

To review information related to the software, go to the Volunteer Resource Guide (Tab 2).

This is how to report the taxable gain and exclusion amount for the sale of a main home.