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Ten Key Tax Facts about Home Sales

In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home this year.

  1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.
  2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more on this topic, seePublication 523, Selling Your Home.
  3. Exclusion Limit.  The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
  4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
  5. When You Must Report the Sale.  You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale, you should review the Questions and Answers on the Net Investment Income Taxon IRS.gov.
  6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.
  7. Only a Main Home Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
  8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, see Publication 523.
  9. Home Sold at a Loss.  If you sell your main home at a loss, you can’t deduct the loss on your tax return.
  10. Report Your Address Change.  After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. You can find the address to send it to in the form’s instructions on page two. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

Additional IRS Resources:

  • Publication 5152: Report changes to the Marketplace as they happen English | Spanish

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Upcoming Tax Deadlines

June

Day
10 Employees Who Work for Tips – If you received $20 or more in tips during May, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
15 Corporations – Deposit the second installment of estimated income tax for 2021. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
15 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in May.
15 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in May.
15 Individuals – If you’re a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 or Form 1040-SR and pay any tax, interest, and penalties due. Otherwise, see Individuals under April 15, earlier. If you want additional time to file your return, file Form 4868 to obtain 4 additional months to file and pay what you estimate you owe in tax to avoid penalties and interest. Then, file Form 1040 or Form 1040-SR by October 15. However, if you’re a participant in a combat zone, you may be able to further extend the filing deadline.
15 Individuals – Make a payment of your 2021 estimated tax if you’re not paying your income tax for the year through withholding (or won\’t pay in enough tax that way). Use Form 1040-ES. This is the second installment date for estimated tax in 2021. You may be able to avoid having to pay estimated taxes by increasing your tax withholding. Penalties may be assessed if you do not pay enough tax through withholding and estimated tax payments or if your payments are late.

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July

Day
12 Employees Who Work for Tips – If you received $20 or more in tips during June, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
15 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in June.
15 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in June.

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August

Day
02 Certain Small Employers – Deposit any undeposited tax if your tax liability is $2,500 or more for 2021 but less than $2,500 for the second quarter.
02 Employers – Deposit the tax owed through June if more than $500.
02 Employers – If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2020. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.
02 Employers – Social security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2021. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until August 10 to file the return.
10 Employees Who Work for Tips – If you received $20 or more in tips during July, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
10 Employers – Social security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2021. This due date applies only if you deposited the tax for the quarter timely, properly, and in full.
16 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in July.
16 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in July.

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