Life changes
You Sold a Home: Do You Owe Tax on the Sale?
Most people who sell the home they live in owe no tax on the gain. Whether you do depends on how long you owned and lived in it, and on your basis.
Reviewed by LaToya Clark-Thompson, FounderLast updated
The exclusion for your main home
If you owned the home and lived in it as your main home for at least two of the five years before the sale, you can generally exclude a large amount of the gain from income. A married couple filing jointly can exclude twice as much as a single filer, if both lived there for two of those years. You can use the exclusion once every two years.
If you do not meet the two-year tests because you moved for a new job, a health reason, or certain unforeseen events, you may still qualify for a partial exclusion. A loss on the sale of a personal home is not deductible.
How the gain is figured
- Start with the sale price, less selling costs such as agent commissions and seller-paid closing costs
- Subtract your adjusted basis: what you paid, plus certain purchase closing costs, plus improvements (a new roof, an addition, a remodeled kitchen), less any depreciation taken or casualty losses claimed
- The result is your gain, and the exclusion applies against it
Repairs and maintenance do not add to basis; improvements do. This is why the receipts from years ago matter. If you inherited the home or received it in a divorce, the basis rules are different. See after a spouse passes away and getting divorced.
When the sale shows on your return
- If you receive Form 1099-S from the closing agent, the sale is reported on Form 8949 and Schedule D, even if all of the gain is excluded
- If the gain is more than your exclusion, the rest is a capital gain, taxed at long-term rates if you owned the home more than a year
- If you ever rented the home or used part of it as a home office and claimed depreciation, that depreciation is taxed when you sell, even if the rest of the gain is excluded
- Time the home was rented before you moved in can reduce the exclusion
Our capital gains planning guide covers the rates and how South Carolina treats the gain.
What to bring to your appointment
- The closing disclosure from the sale, and Form 1099-S if you got one
- The closing disclosure from when you bought the home
- Receipts or a list of major improvements with approximate dates
- Dates you lived in the home, and any periods it was rented
- Your final Form 1098 from the paid-off mortgage
- Depreciation records if the home was ever a rental or office
Common mistakes, and when to get help
- Ignoring a Form 1099-S because the gain was excluded. The IRS expects to see the sale on the return; leaving it off can produce a notice.
- Forgetting improvements, which overstates the gain
- Assuming a former rental qualifies for the full exclusion
- Deducting the property tax the buyer paid at closing
If you received a 1099-S, owned the home for a short time, rented it at any point, or are over the exclusion, it is worth having us prepare the return. If you already filed without reporting a sale, an amended return fixes it before a letter does. Start with tax preparation, and if the next home is in another state, see moving out of South Carolina.
Frequently asked questions
Do I have to pay taxes when I sell my house?
Usually not on a main home you owned and lived in for at least two of the five years before the sale, unless the gain is larger than the exclusion. A married couple filing jointly gets a larger exclusion. Gain above it is a capital gain. Depreciation from renting or a home office is taxed regardless. We calculate the gain from your purchase, sale and improvement records.
Do I report the sale of my home if no tax is due?
If you received Form 1099-S, yes: report the sale on Form 8949 and Schedule D and show the exclusion. The IRS receives a copy of the 1099-S and will expect the sale on your return. If you did not receive one and your whole gain is excluded, you generally do not need to report it, but keep the records.
What counts as a home improvement for taxes?
Work that adds value, extends the home’s life or adapts it to a new use: an addition, a new roof, replacement windows, a remodeled kitchen or bath, a new heating system, paving a driveway. Painting, fixing a leak or replacing a broken part are repairs and do not add to basis. Keep receipts for improvements as long as you own the home, and for some years after.
What if I sell my house before living there two years?
You may still qualify for a partial exclusion if the main reason for selling was a change in place of work, a health issue, or certain unforeseen circumstances such as a divorce, a death or multiple births. The partial exclusion is based on how much of the two-year period you met. Without a qualifying reason, the gain is taxable. Tell us why you sold.
Not the question you had? The full tax FAQ covers more ground, and our client reviews say what the work is actually like.
Related pages
You bought a home
Mortgage interest, points, property tax, itemizing and the SC primary residence filing.
Learn moreYou became a landlord
Schedule E, depreciation, repairs versus improvements, losses and the SC property tax change.
Learn moreYou moved out of South Carolina
The final part-year SC return, income SC still taxes and keeping your new state straight.
Learn moreYour spouse passed away
The final joint return, surviving spouse status, inherited accounts and what to gather.
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