You may be able to exclude any gain from income up to $250,000
($500,000 on a joint return in most cases). If you can exclude all of
the gain, you do not need to report the sale on your tax return.
Maximum Amount of Exclusion
You can exclude the gain on the sale of your main home up to:
- $250,000, or
- $500,000 if all of the following are true.
- You are married and file a joint return for the year.
- Either you or your spouse meets the ownership test.
- Both you and your spouse meet the use test.
- During the 2-year period ending on the date of the sale,
neither you nor your spouse excluded gain from the sale of another
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests.
This means that during the 5-year period ending on the date
of the sale, you must have:
- Owned the home for at least 2 years
(the ownership test), and
- Lived in the home as your main home for at least
2 years (the use test).
If you owned and lived in the property as your main home for less
than 2 years, you can still claim an exclusion in some cases. The
maximum amount you can exclude will be reduced. See Publication 523,
Selling Your Home, for more information.
If you and your spouse file a joint return for the year of sale,
you can exclude gain if either spouse meets the ownership and use
tests. (But see Maximum Amount of Exclusion, earlier.)
Death of spouse before sale.
If your spouse died before the date of sale, you are considered to
have owned and lived in the property as your main home during any
period of time when your spouse owned and lived in it as a main home.
Home transferred from spouse.
If your home was transferred to you by your spouse (or former
spouse if the transfer was incident to divorce), you are considered to
have owned it during any period of time when your spouse owned it.
Use of home after divorce.
You are considered to have used property as your main home during
any period when:
- You owned it, and
- Your spouse or former spouse is allowed to live in it under
a divorce or separation instrument.
Business Use or Rental of Home
You may be able to exclude your gain from the sale of a home that
you have used for business or to produce rental income. But you must
meet the ownership and use tests. See Publication 523
Depreciation for business use after May 6, 1997.
If you were entitled to take depreciation deductions because you
used your home for business purposes or as rental property, you cannot
exclude the part of your gain equal to any depreciation allowed or
allowable as a deduction for periods after May 6, 1997. See
for more information.
Reporting the Gain
Do not report the 2000 sale of your main home on your tax return
- You have a gain and do not qualify to exclude all of it,
- You have a gain and choose not to exclude it.
If you have any taxable gain on the sale of your main home that
cannot be excluded, see Publication 523
for information on how to
report the gain.
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