Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Capital Gain or Loss

Reporting Gain from the Sale of a Home

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 and should be reported even if Form 1099-S was not received. 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, which is out of scope for the VITA/TCE programs, 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.

Tax software hint.

To review information related to the software, go to the Volunteer Resource Guide, Income tab.

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

Form 8949 column entries for home sale details, and corresponding Schedule D entries for proceeds, cost, adjustment, and gain or loss.