About Publication 523: Selling Your Home

Publication 523, provided by the IRS, guides homeowners on the tax implications of selling their primary residence. It explains eligibility for gain exclusion, calculating gain/loss, reporting requirements, and more.

What is Publication 523?

The Internal Revenue Service (IRS) Publication 523, titled "Selling Your Home," is a comprehensive guide that explains the tax rules that apply when you sell or otherwise relinquish ownership of your property, including potential exclusions, deductions, and reporting requirements.

Key Points to Remember About Publication 523:

A. Eligibility: Publication 523 applies to any individual or couple who has sold or plans to sell a principal residence (main home).

B. Purpose: The publication explains how to calculate your gain or loss on the sale, determine if you qualify for the home sale exclusion, and navigate reporting requirements to the IRS.

C. Benefits: Understanding Publication 523 can help you:

  • Save money on taxes: By maximizing your home sale exclusion and understanding deductions, you can potentially reduce your tax liability.
  • Avoid penalties: Knowing the reporting deadlines and requirements helps you stay compliant with the IRS and avoid potential penalties.
  • Make informed decisions: The publication provides valuable information to navigate the complexities of selling your home and make informed financial decisions.

Additional Information About Publication 523:

A. Gain or Loss: Publication 523 guides you through calculating your gain or loss on the sale by subtracting the adjusted basis (purchase price + improvements - depreciation) from the selling price.

B. Home Sale Exclusion: You may exclude up to $250,000 of gain ($500,000 for married couples filing jointly) if you meet the ownership and use tests:

  • Ownership: You must have owned the home for at least 24 months out of the 5 years preceding the sale.
  • Use: The home must have been your principal residence for at least 24 months out of the 5 years preceding the sale.

C. Partial Exclusion: You may qualify for a partial exclusion if you don't meet the full ownership or use tests.

D. Reporting: Publication 523 explains how to report the sale on your tax return, including using Form 1040 and Schedule D.