Do I Have to Report my Home Sale on my Income Tax Return?

You generally can skip reporting your home sale on your income tax return, as long as you did not receive a Form 1099-S: Proceeds from Real Estate Transactions from the real estate closing agent -- a title company, real estate broker or mortgage company.

To avoid getting this form (and having a copy sent to the IRS), you must give the agent some assurances at any time before February 15 of the year after the sale that all the profit on the sale is tax-free.   But even then the agent may issue a 1099-S. 

Essentially, the IRS does not require the real estate agent who closes the deal to use Form 1099-S to report a home sale amounting to $250,000 or less ($500,000 or less for married couples filing jointly).  But some do.

If you did receive a Form 1099-S, that means the IRS got a copy as well. That doesn't necessarily mean you owe tax on the sale, though.  But since it will take a couple of years for the IRS to catch the 1099-S and begin asking questions, it makes sense to go on and report the sale on your tax return showing that you qualify for the exclusion and be sure to keep a copy of your paperwork.

                                                                             Thomas A. Leggette, J.D., Author:

                                                                             Consumer Contracts in Virginia

                                                                             Virginia Continuing Legal Education

This article is not provided for use or reliance by you or any third parties and does not purport to be exhaustive or to render legal advice for your particular situation or any other specific case. It is meant merely to assist you in sharpening the questions you might ask of your legal advisor in your particular case. Please give me a call should you have any questions. (See: Disclaimer)