Reporting Home Sale

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Leesbro63
Posts: 10640
Joined: Mon Nov 08, 2010 3:36 pm

Reporting Home Sale

Post by Leesbro63 »

My parents sold their home in 2021. The gain was less than $500,000. They just received a Form 1099-S showing the sale amount. Googling this shows that this has to be reported, but there is no taxable gain. I can’t find how to do this. Do you just make the basis equal to the reported sale price? Or is there some other way to report the sale while making the taxable amount to be zero?
BogleTaxPro
Posts: 650
Joined: Sat Apr 04, 2020 6:08 pm

Re: Reporting Home Sale

Post by BogleTaxPro »

Yes, it has to be reported.
Most tax software has a 'sale of personal home' worksheet that will walk you through entering the sales price/cost basis and adjust the gain for the exclusion accordingly. Then the final result ends up on schedule D/8949.
Are you sure the 'gain' is less than $500,000? I only ask because a lot of people think 'oh if I sold the house for $700,000 but I had a mortgage of $500,000 left then the gain is $200,000...which is not correct. Profit <> gain. The gain is calculated by subtracting the purchase price of the house (plus any capital improvements plus any expenses of the buy/sell transactions) from the sales price.

Please see IRS publication 523 (https://www.irs.gov/publications/p523) for more details.
Topic Author
Leesbro63
Posts: 10640
Joined: Mon Nov 08, 2010 3:36 pm

Re: Reporting Home Sale

Post by Leesbro63 »

BogleTaxPro wrote: Mon Jan 24, 2022 10:12 am Yes, it has to be reported.
Most tax software has a 'sale of personal home' worksheet that will walk you through entering the sales price/cost basis and adjust the gain for the exclusion accordingly. Then the final result ends up on schedule D/8949.
Are you sure the 'gain' is less than $500,000? I only ask because a lot of people think 'oh if I sold the house for $700,000 but I had a mortgage of $500,000 left then the gain is $200,000...which is not correct. Profit <> gain. The gain is calculated by subtracting the purchase price of the house (plus any capital improvements plus any expenses of the buy/sell transactions) from the sales price.

Please see IRS publication 523 (https://www.irs.gov/publications/p523) for more details.
Yes, I’m positive that the gain is way below $500,000.
adamthesmythe
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Joined: Mon Sep 22, 2014 4:47 pm

Re: Reporting Home Sale

Post by adamthesmythe »

If you get at 1099-S then it is reported on your taxes for the year. If all conditions are satisfied there will be no tax on a gain less than 500K.

If you do not get a 1099- and this happened to me- then you might get a letter from the IRS. After explaining things there was no tax owed.
BogleTaxPro
Posts: 650
Joined: Sat Apr 04, 2020 6:08 pm

Re: Reporting Home Sale

Post by BogleTaxPro »

Cool. Then, as I said previously...you can use the Sale of Personal Home worksheet in whatever tax software you're using. Or, if you're a do-it-yourself type you enter the sale and the exclusion on form 8949 (see instructions for home sales on page 8 of this document https://www.irs.gov/pub/irs-pdf/i8949.pdf) and it flows through to schedule D. I wouldn't just set the basis equal to the sales price...that might raise a red flag with the IRS and get you a letter.
WAROB
Posts: 156
Joined: Fri Jan 22, 2021 11:13 am

Re: Reporting Home Sale

Post by WAROB »

Look up the IRS instructions for Sch D.

You record the actual sales price per the 1099 and their actual basis. The gain exclusion is entered as a negative in column G of the 8949 and you will use code “H” in column F.
Topic Author
Leesbro63
Posts: 10640
Joined: Mon Nov 08, 2010 3:36 pm

Re: Reporting Home Sale

Post by Leesbro63 »

WAROB wrote: Mon Jan 24, 2022 10:34 am Look up the IRS instructions for Sch D.

You record the actual sales price per the 1099 and their actual basis. The gain exclusion is entered as a negative in column G of the 8949 and you will use code “H” in column F.
After reading the suggestions here, I did the Turbotax step-by-step thing and it did exactly what you just said. Thank you!
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