For sales prior to May 7, 1997, if you have a gain from the sale or exchange of your
home, and were age 55 or older on the date of sale, you may qualify to exclude some or all
of the gain from your gross income. This exclusion is a choice and can be made only once
for sales or exchanges after July 26, 1978 and prior to August 5, 1997.
Besides being age 55 or older on the date of sale, you must have owned and lived in the
home for at least 3 years out of the 5-year period ending on the date of the sale or
exchange. The 3 years of ownership and use do not have to be continuous. An exception to
the 3-year use requirement applies to certain taxpayers who become physically or mentally
incapable of self-care. For more information about the exception, see Publication
523, Selling Your Home.
The maximum exclusion is $125,000, or $62,500 for an individual who is married on the
date of the sale and files a separate return. If you and your spouse jointly own your home
and file a joint return, only one of you needs to meet the age, ownership, and use tests
for making this choice. Married couples are entitled to only one election per couple, not
one for each spouse. Your marital status, for purposes of this exclusion, is determined as
of the date of sale.
If either you or your spouse have excluded gain from a sale or exchange after July 26,
1978, neither of you may choose to exclude another gain. If you have not previously used
this exclusion, but marry someone who has, you will not be able to use the exclusion.
If you and your spouse owned separate homes before your marriage and sold both homes
after your marriage, you may exclude the gain on one of them, but not on both. If you each
sold your home before marriage, each may claim the $125,000 exclusion on your joint or
separate returns.
If a sale or contract was signed after May 6, 1997 but prior to August 5, 1997, you may
use the age 55 and over exclusion. After August 4, 1997 this provision is repealed.
The exclusion is shown on Form 2119, Sale of Your Home,
which is filed with your Form 1040 for the year of sale. Refer to Topic 702 for more information on how to report gain. For more
information on excluding gain from the sale of your home, order Publication
523 by calling 1-800-829-3676.
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