If you sold or exchanged your main home during the year, you must report the sale on Form 2119, Sale of Your Home. There are separate instructions
for the form to help you complete it.
Attach the Form 2119 to Form 1040, and report any taxable gain
on Schedule D, Form 1040. A loss on the sale of your main home is not deductible, but must
be reported on Form 2119 and attached to Form 1040.
For sales prior to May 7, 1997, special rules allow you to postpone gains from the sale
if you replace your old home with a new home costing at least as much as the adjusted
sales price of the old. This must be done within time limits. The time allowed to replace
your old home and occupy your new home is usually a period that begins 2 years before and
ends 2 years after you sell your old home. Certain members of the armed forces or people
living abroad may be entitled to a longer replacement period.
The adjusted sales price is the selling price minus selling expenses and fixing-up
expenses. If your new home costs less than the adjusted sales price of your old home, or
you do not replace your old home within the replacement period, you will have a taxable
If you have not yet replaced your home when you file your tax return, but intend to do
so, complete Part 1 of Form 2119. You must complete a second 2119
when you replace the home. If you do not replace your old home within the replacement
period, or you do not spend as much as the adjusted sales price, you must file an amended
return, Form 1040X, for the year of sale. Attach the completed
Form 2119 and Schedule D. You must pay tax on the taxable amount of the gain plus interest
calculated from the due date of the return you are amending.
If you or your spouse are age 55 or older on the date of the sale, you may qualify to
exclude some or all taxable gain. Refer to Topic 703 for
information about this exclusion.
For sales after May 6, 1997, a new exclusion allows you to exclude up to $250,000 of
gain ($500,000, if married filing a joint return) realized on the sale or exchange of your
main home. The exclusion is allowed each time you sell or exchange your main home, but
generally no more frequently than once every two years. To be eligible, the main home must
have been owned and used as your main home for a combined period of at least two years out
of the five years prior to the sale or exchange. Special rules apply for partial
exclusion, depreciation and other situations. If a sale of contract was signed after May
6, 1997 but before August 5, 1997, you may use the postponement provision or the $125,000
one time exclusion. The new exclusion replaces the postponement and one time exclusion
provisions for sales after May 6, 1997.
Additional information on selling your home is available in Publication
523, Selling Your Home, which can be ordered by calling 1-800-829-3676.
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