Publication 523 - Introductory Material
New rule for employees of the intelligence community. If you are an employee of the intelligence community, you may be able to exclude from income a gain from selling your main
home, even if you did
not live in it for the required 2 years during the 5-year period ending on the date of sale. This choice applies to any sale
of a main home after
December 20, 2006. For more information, see Members of the uniformed services or Foreign Service or employees of the intelligence
community under Period of Ownership and Use, later.
Vacant land used as part of main home destroyed by a hurricane. You may qualify to exclude from income gain from the sale of vacant land you owned and used as part of your main home that
was destroyed by
Hurricanes Katrina, Rita, or Wilma, if you sell vacant land within 3 years (instead of 2 years) from the date of destruction.
For more information,
see Vacant land under Main Home, later.
Gulf Opportunity Zone Act of 2005 (Act). This Act provides tax relief for persons affected by Hurricanes Katrina, Rita, and Wilma. Under this Act, the rules for recapture
of a federal
mortgage subsidy have changed if you received a qualified home improvement loan (QHIL) funded by a qualified mortgage bond
that is a qualified Gulf
Opportunity Zone Bond or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma
GO Zone. For more
information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, later.
Credits affecting the basis of a home. If you claimed the nonbusiness energy property credit or the residential energy efficient property credit, you must decrease
the basis of your home
by the amount of the credit claimed. See Adjusted Basis, later. For more information about these credits, see also Form 5695, Residential
Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address.
Mail it to the
Internal Revenue Service Center for your old address. (Addresses for the Service Centers are on the back of the form.)
Home sold with undeducted points. If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining
points in the year
of sale. See Points in Part I of Publication 936, Home Mortgage Interest Deduction.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of
selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children
home by looking at the
photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication explains the tax rules that apply when you sell your main home. Generally, your main home is the one in which
you live most of the
If you sold your main home in 2007, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on
a joint return in most
cases). See Excluding the Gain, later. If you can exclude all of the gain, you do not need to report the sale on your tax return.
If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040). You may also have to include
Form 4797, Sales of
Business Property. See Reporting the Sale, later.
If you have a loss on the sale, you cannot deduct it on your return.
The main topics in this publication are:
Other topics include:
Business use or rental of home,
Deducting taxes in the year of sale, and
Recapturing a federal mortgage subsidy.
This publication includes worksheets you can use to figure your gain (or loss) and your exclusion. Use Worksheet 1
to figure the
adjusted basis of the home you sold. Use Worksheet 2
to figure the gain (or loss), the exclusion, and the taxable gain (if any) on the
sale. In some situations, you may also need to use Worksheet 3
to figure a reduced maximum exclusion.
Date of sale.
If you received a Form 1099-S, Proceeds From Real Estate Transactions, the date of
sale should be shown in box 1. If you did not receive this form, the date of sale is the earlier of (a) the date title transferred
or (b) the date the
economic burdens and benefits of ownership shifted to the buyer. In most cases, these dates are the same.
What is not covered in this publication.
This publication does not cover the sale of rental property, second homes, or vacation homes. For information on how
to report any gain or loss
from those sales, see Publication 544, Sales and Other Dispositions of Assets.
Comments and suggestions.
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number,
including the area code, in
You can email us at
. (The asterisk must be included in the
address.) Please put “Publications Comment
” on the subject line. Although we cannot respond individually to each email, we do appreciate your
feedback and will consider your comments as we revise our tax products.
Ordering forms and publications.
to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response
within 10 days after your request is received.
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
If you have a tax question, check the information available on
or call 1-800-829-1040. We cannot answer tax questions sent to
either of the above addresses.
Useful Items - You may want to see:
Residential Rental Property
Tax Information for First-Time Homeowners
Sales and Other Dispositions of Assets
Casualties, Disasters, and Thefts
Basis of Assets
Business Use of Your Home
Home Mortgage Interest Deduction
Form (and Instructions)
Schedule D (Form 1040)
Capital Gains and Losses
Amended U.S. Individual Income Tax Return
Proceeds From Real Estate Transactions
Sales of Business Property
Change of Address
Recapture of Federal Mortgage Subsidy
See How To Get Tax Help, near the end of this publication, for information about getting these publications and forms.