Tax Deductions When Selling A Home

When cashing out of your home, can you deduct the cost of the home warranty, property tax, that bathroom you remodeled? Below we give you some tips to help maximize your deductions. Consult your attorney or accountant before following any tips.

Table of Contents:

Sale of Residence – Real Estate Tax Resources
Ownership and Use Tests
Gains & Losses Relevant Resources
Worksheets
Reporting a Sale
Business Use or Rental of Home
More Than One Home
Relevant Miscellaneous Resources Not Included Elsewhere

Sale of Residence – Real Estate Tax Resources

IRS Real Estate Tax Center

Real Estate Tax Tips

Sale of Your Home

Publication 523: Selling Your Home: for use in preparing tax returns

About.com: Capital Gains Taxes

BankRate.com: "Capital Gains Home-Sale Tax Break a Boon for Owners"

Cornell.edu: U.S. Code 121: "Exclusion of Gain From Sale of Principle Residence"

Nolo Law: "The $250,000/$500,000 Home Sale Tax Exclusion"

Forbes :"9 Tax-Related Myths About Selling Your Home"

Washington Post :"IRS Rules Can Make Sale of a House Less Taxing"

Wall Street Journal: "Will Your Home Sale Be Tax-Free?"

For Dummies: "Tax Rules for Selling Your Home"

San Francisco Gate: "Real Estate Taxes vs. Property Taxes"

Ownership and Use Tests

For homeowners to be eligible to claim an exclusion regarding the gain of a home sale, they must meet the ownership and use requirements. The ownership test requires the taxpayer to have owned the house for a minimum of two years. The use test requires the taxpayer to have lived in the house as his/her main home for a minimum duration of two years.

Resources for Requirements of Use and Ownership Tests, and Ways to Qualify:

IRS: ownership and uses tests, with exceptions and examples

Uncle Fed's Tax Board: examples of ownership and use tests

Ehow.com: "How to Meet Ownership and Use Tests"

J.K. Lasser: "Home Sale Exclusion"

Estate Plans Plus: "Exclusions of Capital Gains on the Sale of a Home"

JustAnswer.com: how to accurately calculate the IRS ownership and use test

Legal Assistance Attorney Yosefi Seltzer: "Overview of the Tax Consequences of the Sale of a Home"

Gains & Losses Relevant Resources

IRS Resources:

Most Commonly Asked Questions Regarding the Capital Gains, Losses, and Sale of a Home

Ten Facts about Capital Gains and Losses

Topic 409: Capital Gains and Losses

Chapter 16, Reporting Gains and Losses

Other Resources:

USA.gov: "Tax Consequences of Selling a Home at a Profit or Loss"

20 Something Finance: "Are Losses on the Sale of a Home Tax Deductible?"

About.com: options for loss on the sale of a house

Charles Schwab: "Paying Capital Gains Tax on a Home Sale"

Kiplinger: new tax rules, including rules on gains/losses of home sales

How Stuff Works: "How Capital Gains Tax Works"

National Association of Realtors: how to calculate gain and other information about capital gain in real estate

Worksheets

IRS Home Sale Worksheets can assist consumers in factoring the adjusted basis of a home sold. The worksheets are a series of "if"/"then" solutions that allow the home-seller(s to determine the actual amount realized from a home sale.

Actual Worksheets, Examples, and How-To's:

IRS Worksheets #1, #2, and #3:

Taxbrain home sales worksheets

Kitsapgov.com: Verification of Residency and Capital Gain or Loss Worksheet

Infoloom: three sold home worksheets and instructions

Taxmap: examples of completed worksheets

Reporting A Sale

IRS Forms and Resources:

Reporting a Home Sale to the IRS , including forms to complete and return

Proceeds from Real Estate Transaction Forms

When NOT to Report the Sale of a Home

Reporting the Sale of a Second Residence

Reporting Gains and Losses to the IRS

Kiplinger: reporting a home sale on a tax return

New York State Department of Taxation and Finance: real estate property transfer report/sales reporting

Wisconsin Department of Revenue: "Individual Income Tax Sale of Home" Frequently Asked Questions

Investopedia: information on new tax regulations and reporting home sales

Business Use or Rental of Home

Business Use: According to the IRS, as stated in Topic 509 , deductions on the parts of one's home that are used for business might be plausible if they meet certain criteria.

IRS Criteria for claiming "business use" on a part of one's home

Form 8829: "Expenses for Business Use of Your Home"

Publication 587: "Business Use of Your Home"

About.com: Information on "Office-In-Home Tax Deductions"

Forbes : dos and don'ts of claiming a home office

Rental of a Home: The IRS website states that often the cash value or fair market value received from renting real estate or privately owned property is taxable to the homeowner or landlord as rental income. The following resources lay out laws and information regarding rental property and taxes:

IRS Publication 527: "Residential Rental Property"

Nolo Law: "Top Ten Tax Deductions For Landlords"

House Logic: "Tax Deductions For Rental Homes"

Investopedia: "Tax Deductions for Rental Property Owners"

San Francisco Gate: "Tax Write-Offs for Rental Properties"

More Than One Home

Tax information, Deductions, Implications, and Guidelines for Those Who Own Multiple Homes or Properties:

San Francisco Gate: "Tax Deductions for Real Estate Taxes on Multiple Properties"

Investopedia: "Tax Breaks for Second Home Owners"

Fox News: tax implications when selling a home, including for those with multiple properties

Marketwatch: taxes on the sale of a vacation or second home

Reference.com: "Capital Gains on Sale of Second Home"

Bankrate: "Second-Home Tax Rules Set to Change"

Financial Web: "Selling Your Second Home without Capital Gains Taxes"

Wall Street Journal: tax mistakes that many home-owners make when selling their vacation home

EHow.com: tax questions regarding the sale of a second home

MSN Real Estate: "Tax Crackdown on Second Homes"

Relevant Miscellaneous Resources Not Included Elsewhere

Realtor.com: tax benefits when selling your home

Investopedia: "10 Most Overlooked Tax Deductions"

Internal Revenue Service: "Deductible Taxes" for real estate

IRS Publication 503: tax information for homeowners on what is and isn't deductible

Kiplinger: tax "Deductions for Homeowners"

Nolo Law: "Deducting a Loss on the Sale of a Home"

Fox Business: tax write-offs for homeowners

About.com: "Home Buying/Selling", and taxes


The information in this article is intended to provide guidance on the proper maintenance and care of systems and appliances in the home. Not all of the topics mentioned are covered by our home warranty or maintenance plans. Please review your home warranty contract carefully to understand your coverage.