Schedule D – Sale of Main Home

A taxpayer may qualify to exclude from their income all or part of any gain from the sale of their main home. A main home is the one in which the taxpayer lives most of the time. Fill out the Sale of Main Home Worksheet in the Schedule D, ‘Other‘ Menu to see if any of the gain from the sale of their main home can be excluded.

Generally, if you meet the following tests, you can exclude up to $250,000 ($500,000 if you are married and file a joint return) of the gain from the sale of a main home:

You must have owned the home for at least 2 years – (the ownership test)
You must have lived in the home as your main home for at least 2 years – (the use test) – The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they have to occur at the same time. A taxpayer meets the tests if they can show that they owned and lived in the property as their main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale.

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Reporting the Sale

Do not report the sale of a main home on a tax return unless the taxpayer has a gain and at least part of it is taxable. Report any taxable gain on Schedule D (Form 1040).

If your spouse died before the sale or exchange of your main home, you can exclude up to $500,000 of gain if the sale or exchange is no later than 2 years after your spouse’s death. Also, you can exclude the $500,000 if both spouses met the Use Requirement, at least one spouse met the Ownership Requirement, or both spouses met the Ownership Requirement and the living spouse did not remarry before the sale or exchange.

Reporting the Gain

During the 2-year period ending on the date of the sale, you must not have excluded any gain from the sale of another home. If a taxpayer has a gain from the sale of their main home, they may be able to exclude up to $250,000 of the gain from their income ($500,000 on a joint return in most cases).

If a taxpayer can exclude all of the gain, they do not need to report the sale on their tax return. If they have gain that cannot be excluded, it is taxable. Report any taxable gain on Schedule D (Form 1040).

Reporting the Loss ;- You cannot deduct a loss from the sale of your main home. More Than One Home If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Example One: You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.
Example Two: You own a house, but you live in another house that you rent. The rented house is your main home.

NOTE: This is a guide on entering a Sale of Home into the Keystone Tax Solutions program. This is not intended as tax advice.

Updated on July 9, 2018

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