"Not every homeowner has to report a sale on their tax return, but if you receive Form 1099-S or your gain exceeds IRS limits, reporting is required. The ownership and use tests determine whether you can exclude up to $250,000 ($500,000 for joint filers) in profit from your taxes. Special situations like divorce, death, or relocation may still allow you to claim a full or partial exclusion. Detailed records of purchase price, improvements, and closing costs are essential for accurate reporting and avoiding penalties."
"At closing, the settlement agent may issue Form 1099-S, Proceeds from Real Estate Transactions.The IRS also receives a copy, which means they'll expect to see this transaction on your return. If you fail to report it, you could trigger an IRS notice or audit. Example: If you sold your home for $450,000 and received a 1099-S, but your gain is fully excludable, you still must file the form to explain why no tax is owed."
Reporting a home sale is required when the seller receives Form 1099‑S or when taxable gain exceeds IRS exclusion limits. Homeowners who meet the ownership and use tests can exclude up to $250,000 ($500,000 for joint filers) of profit. Special circumstances such as divorce, death, or job-related relocation can allow full or partial exclusions. Accurate basis calculation requires documentation of purchase price, capital improvements, and closing costs. Failure to report a transaction for which the IRS has a record can trigger notices or audits. Maintain detailed records to substantiate exclusions and avoid penalties.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
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