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Main Home Qualifications

If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return). To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

  • Owned the home for at least two years (the ownership test) and
  • Lived in the home as your main home for at least two years (the use test).

Also, to qualify for the exclusion, neither you nor your spouse had excluded a gain from the sale of another home during the 2-year period ending on the date of the sale.

According to the IRS Instructions for Schedule D Capital Gains and Losses, if you sold or exchanged your main home, do not report it on your tax return unless your gain exceeds your exclusion amount. Any gain you cannot exclude is taxable and should be reported on Schedule D (Form 1040). You cannot deduct a loss from the sale of your main home.

Per IRS Publication 523 Selling Your Home, on page 16:

Determine whether your home sale is an installment sale. If you finance the buyer's purchase of your home (you hold a note, mortgage, or other financial agreement), you probably have an installment sale. You may be able to report any non-excludable gain on an installment basis. Use Form 6252, Installment Sale Income, to report the sale.

For more information, see Pub. 537, Installment Sales.

Enter your exclusion on Line 15 of Form 6252 Installment Sale Income.

To report the sale of your main home on an installment contract in the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Investment Income in the Federal Quick Q&A Topics menu to expand, then click Payments received from an installment sale.
  3. Click + Add Form 6252 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

By completing this section, you are calculating:

  • The gain or loss on the sale of your main home,
  • If a gain, how much will be excluded,
  • Total gross profit from sale (Form 6252, Line 16), and
  • Any installment sale income for current year (Form 6252, Line 26), which will be included with the amount on Schedule 1 (Form 1040) Additional Income and Adjustments to Income, Line 4.

For additional information, please review IRS Publication 537 Installment Sales.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.

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