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Irs State Tax Forms

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Irs State Tax Forms

Irs state tax forms Publication 523 - Main Content Table of Contents Main HomeVacant land. Irs state tax forms Factors used to determine main home. Irs state tax forms Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. Irs state tax forms Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. Irs state tax forms Individual taxpayer identification number (ITIN). Irs state tax forms More information. Irs state tax forms Comprehensive Examples Special SituationsException for sales to related persons. Irs state tax forms Deducting Taxes in the Year of SaleForm 1099-S. Irs state tax forms More information. Irs state tax forms Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. Irs state tax forms Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. Irs state tax forms ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Irs state tax forms To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Irs state tax forms Land. Irs state tax forms   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Irs state tax forms Example. Irs state tax forms You buy a piece of land and move your main home to it. Irs state tax forms Then, you sell the land on which your main home was located. Irs state tax forms This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Irs state tax forms Vacant land. Irs state tax forms   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. Irs state tax forms If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. Irs state tax forms See Excluding the Gain , later. Irs state tax forms The destruction of your home is treated as a sale of your home. Irs state tax forms As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. Irs state tax forms For information, see Publication 547. Irs state tax forms More than one home. Irs state tax forms   If you have more than one home, you can exclude gain only from the sale of your main home. Irs state tax forms You must include in income the gain from the sale of any other home. Irs state tax forms If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. Irs state tax forms Example 1. Irs state tax forms You own two homes, one in New York and one in Florida. Irs state tax forms From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Irs state tax forms In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Irs state tax forms You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Irs state tax forms Example 2. Irs state tax forms You own a house, but you live in another house that you rent. Irs state tax forms The rented house is your main home. Irs state tax forms Example 3. Irs state tax forms You own two homes, one in Virginia and one in New Hampshire. Irs state tax forms In 2009 and 2010, you lived in the Virginia home. Irs state tax forms In 2011 and 2012, you lived in the New Hampshire home. Irs state tax forms In 2013, you lived again in the Virginia home. Irs state tax forms Your main home in 2009, 2010, and 2013 is the Virginia home. Irs state tax forms Your main home in 2011 and 2012 is the New Hampshire home. Irs state tax forms You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Irs state tax forms Factors used to determine main home. Irs state tax forms   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Irs state tax forms Those factors include the following. Irs state tax forms Your place of employment. Irs state tax forms The location of your family members' main home. Irs state tax forms Your mailing address for bills and correspondence. Irs state tax forms The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. Irs state tax forms The location of the banks you use. Irs state tax forms The location of recreational clubs and religious organizations of which you are a member. Irs state tax forms Property used partly as your main home. Irs state tax forms   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Irs state tax forms For details, see Business Use or Rental of Home , later. Irs state tax forms Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Irs state tax forms Subtract the adjusted basis from the amount realized to get your gain or loss. Irs state tax forms     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. Irs state tax forms   Gain is the excess of the amount realized over the adjusted basis of the property. Irs state tax forms Loss. Irs state tax forms   Loss is the excess of the adjusted basis over the amount realized for the property. Irs state tax forms Selling Price The selling price is the total amount you receive for your home. Irs state tax forms It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Irs state tax forms Personal property. Irs state tax forms   The selling price of your home does not include amounts you received for personal property sold with your home. Irs state tax forms Personal property is property that is not a permanent part of the home. Irs state tax forms Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Irs state tax forms Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Irs state tax forms Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. Irs state tax forms Payment by employer. Irs state tax forms   You may have to sell your home because of a job transfer. Irs state tax forms If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Irs state tax forms Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. Irs state tax forms Option to buy. Irs state tax forms   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Irs state tax forms If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Irs state tax forms Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. Irs state tax forms Form 1099-S. Irs state tax forms   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. Irs state tax forms   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Irs state tax forms Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Irs state tax forms Amount Realized The amount realized is the selling price minus selling expenses. Irs state tax forms Selling expenses. Irs state tax forms   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Irs state tax forms ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Irs state tax forms This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Irs state tax forms For information on how to figure your home's adjusted basis, see Determining Basis , later. Irs state tax forms Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Irs state tax forms Gain on sale. Irs state tax forms   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. Irs state tax forms Loss on sale. Irs state tax forms   If the amount realized is less than the adjusted basis, the difference is a loss. Irs state tax forms Generally, a loss on the sale of your main home cannot be deducted. Irs state tax forms Jointly owned home. Irs state tax forms   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Irs state tax forms Separate returns. Irs state tax forms   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Irs state tax forms Your ownership interest is generally determined by state law. Irs state tax forms Joint owners not married. Irs state tax forms   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Irs state tax forms Each of you applies the rules discussed in this publication on an individual basis. Irs state tax forms Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Irs state tax forms Foreclosure or repossession. Irs state tax forms   If your home was foreclosed on or repossessed, you have a disposition. Irs state tax forms See Publication 4681 to determine if you have ordinary income, gain, or loss. Irs state tax forms More information. Irs state tax forms   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. Irs state tax forms Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. Irs state tax forms Abandonment. Irs state tax forms   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Irs state tax forms Trading (exchanging) homes. Irs state tax forms   If you trade your home for another home, treat the trade as a sale and a purchase. Irs state tax forms Example. Irs state tax forms You owned and lived in a home with an adjusted basis of $41,000. Irs state tax forms A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Irs state tax forms This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). Irs state tax forms If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Irs state tax forms Transfer to spouse. Irs state tax forms   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). Irs state tax forms This is true even if you receive cash or other consideration for the home. Irs state tax forms As a result, the rules explained in this publication do not apply. Irs state tax forms   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. Irs state tax forms You have no gain or loss. Irs state tax forms Exception. Irs state tax forms   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. Irs state tax forms In that case, you generally will have a gain or loss. Irs state tax forms More information. Irs state tax forms    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. Irs state tax forms Involuntary conversion. Irs state tax forms   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Irs state tax forms This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). Irs state tax forms Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Irs state tax forms Your basis in your home is determined by how you got the home. Irs state tax forms Generally, your basis is its cost if you bought it or built it. Irs state tax forms If you got it in some other way (inheritance, gift, etc. Irs state tax forms ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Irs state tax forms While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Irs state tax forms The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Irs state tax forms To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. Irs state tax forms Filled-in examples of that worksheet are included in the Comprehensive Examples , later. Irs state tax forms Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Irs state tax forms Purchase. Irs state tax forms   If you bought your home, your basis is its cost to you. Irs state tax forms This includes the purchase price and certain settlement or closing costs. Irs state tax forms In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Irs state tax forms If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. Irs state tax forms Seller-paid points. Irs state tax forms   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. Irs state tax forms    IF you bought your home. Irs state tax forms . Irs state tax forms . Irs state tax forms THEN reduce your home's basis by the seller-paid points. Irs state tax forms . Irs state tax forms . Irs state tax forms after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. Irs state tax forms after April 3, 1994 even if you did not deduct them. Irs state tax forms Settlement fees or closing costs. Irs state tax forms   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Irs state tax forms You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Irs state tax forms A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Irs state tax forms   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Irs state tax forms   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. Irs state tax forms   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. Irs state tax forms Real estate taxes. Irs state tax forms   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. Irs state tax forms    IF. Irs state tax forms . Irs state tax forms . Irs state tax forms AND. Irs state tax forms . Irs state tax forms . Irs state tax forms THEN the taxes. Irs state tax forms . Irs state tax forms . Irs state tax forms you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. Irs state tax forms the seller reimburses you do not affect the basis of your home. Irs state tax forms the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. Irs state tax forms you reimburse the seller do not affect the basis of your home. Irs state tax forms Construction. Irs state tax forms   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. Irs state tax forms   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. Irs state tax forms It also includes certain settlement or closing costs. Irs state tax forms You may have to reduce your basis by points the seller paid for you. Irs state tax forms For more information, see Seller-paid points and Settlement fees or closing costs , earlier. Irs state tax forms Built by you. Irs state tax forms   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Irs state tax forms Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. Irs state tax forms Temporary housing. Irs state tax forms   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. Irs state tax forms To figure the amount of the reduction, multiply the contract price by a fraction. Irs state tax forms The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. Irs state tax forms Cooperative apartment. Irs state tax forms   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. Irs state tax forms This may include your share of a mortgage on the apartment building. Irs state tax forms Condominium. Irs state tax forms   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. Irs state tax forms Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. Irs state tax forms These situations are discussed in the following pages. Irs state tax forms Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. Irs state tax forms Other special rules may apply in certain situations. Irs state tax forms If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. Irs state tax forms Home received as gift. Irs state tax forms   Use the following chart to find the basis of a home you received as a gift. Irs state tax forms IF the donor's adjusted basis at the time of the gift was. Irs state tax forms . Irs state tax forms . Irs state tax forms THEN your basis is. Irs state tax forms . Irs state tax forms . Irs state tax forms more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. Irs state tax forms   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. Irs state tax forms If using the fair market value results in a gain, you have neither gain nor loss. Irs state tax forms equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. Irs state tax forms equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). Irs state tax forms Fair market value. Irs state tax forms   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. Irs state tax forms If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. Irs state tax forms Part of federal gift tax due to net increase in value. Irs state tax forms   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Irs state tax forms The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Irs state tax forms The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. Irs state tax forms Home acquired from a decedent who died before or after 2010. Irs state tax forms   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). Irs state tax forms If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. Irs state tax forms If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. Irs state tax forms Surviving spouse. Irs state tax forms   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. Irs state tax forms The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). Irs state tax forms The basis in your interest will remain the same. Irs state tax forms Your new basis in the home is the total of these two amounts. Irs state tax forms   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. Irs state tax forms Example. Irs state tax forms Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. Irs state tax forms Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). Irs state tax forms Community property. Irs state tax forms   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. Irs state tax forms When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. Irs state tax forms For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Irs state tax forms   For more information about community property, see Publication 555, Community Property. Irs state tax forms    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. Irs state tax forms Home received as trade. Irs state tax forms   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. Irs state tax forms If you traded one home for another, you have made a sale and purchase. Irs state tax forms In that case, you may have a gain. Irs state tax forms See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. Irs state tax forms Home received from spouse. Irs state tax forms   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. Irs state tax forms Transfers after July 18, 1984. Irs state tax forms   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Irs state tax forms In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. Irs state tax forms This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. Irs state tax forms   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. Irs state tax forms This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Irs state tax forms Your basis in the half interest you already owned does not change. Irs state tax forms Your new basis in the home is the total of these two amounts. Irs state tax forms Transfers before July 19, 1984. Irs state tax forms   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. Irs state tax forms More information. Irs state tax forms   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. Irs state tax forms Involuntary conversion. Irs state tax forms   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. Irs state tax forms If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. Irs state tax forms Example. Irs state tax forms A fire destroyed your home that you owned and used for only 6 months. Irs state tax forms The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. Irs state tax forms Your gain is $50,000 ($130,000 − $80,000). Irs state tax forms You bought a replacement home for $100,000. Irs state tax forms The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. Irs state tax forms The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. Irs state tax forms The basis of the new home is figured as follows. Irs state tax forms Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. Irs state tax forms   For more information about basis, see Publication 551. Irs state tax forms Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Irs state tax forms To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Irs state tax forms Filled-in examples of that worksheet are included in Comprehensive Examples , later. Irs state tax forms Recordkeeping. Irs state tax forms You should keep records to prove your home's adjusted basis. Irs state tax forms Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Irs state tax forms But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Irs state tax forms Keep records proving the basis of both homes as long as they are needed for tax purposes. Irs state tax forms The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Irs state tax forms Increases to Basis These include the following. Irs state tax forms Additions and other improvements that have a useful life of more than 1 year. Irs state tax forms Special assessments for local improvements. Irs state tax forms Amounts you spent after a casualty to restore damaged property. Irs state tax forms Improvements. Irs state tax forms   These add to the value of your home, prolong its useful life, or adapt it to new uses. Irs state tax forms You add the cost of additions and other improvements to the basis of your property. Irs state tax forms   The following chart lists some other examples of improvements. Irs state tax forms Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. Irs state tax forms   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Irs state tax forms Example. Irs state tax forms You put wall-to-wall carpeting in your home 15 years ago. Irs state tax forms Later, you replaced that carpeting with new wall-to-wall carpeting. Irs state tax forms The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Irs state tax forms Repairs. Irs state tax forms   These maintain your home in good condition but do not add to its value or prolong its life. Irs state tax forms You do not add their cost to the basis of your property. Irs state tax forms Examples. Irs state tax forms Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. Irs state tax forms Exception. Irs state tax forms   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. Irs state tax forms For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. Irs state tax forms Decreases to Basis These include the following. Irs state tax forms Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). Irs state tax forms For details, see Publication 4681. Irs state tax forms Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Irs state tax forms For details, see Publication 4681. Irs state tax forms Gain you postponed from the sale of a previous home before May 7, 1997. Irs state tax forms Deductible casualty losses. Irs state tax forms Insurance payments you received or expect to receive for casualty losses. Irs state tax forms Payments you received for granting an easement or right-of-way. Irs state tax forms Depreciation allowed or allowable if you used your home for business or rental purposes. Irs state tax forms Energy-related credits allowed for expenditures made on the residence. Irs state tax forms (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Irs state tax forms ) Adoption credit you claimed for improvements added to the basis of your home. Irs state tax forms Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Irs state tax forms Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Irs state tax forms An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Irs state tax forms District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. Irs state tax forms General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Irs state tax forms Discharges of qualified principal residence indebtedness. Irs state tax forms   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Irs state tax forms This exclusion applies to discharges made after 2006 and before 2014. Irs state tax forms If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. Irs state tax forms   File Form 982 with your tax return. Irs state tax forms See the form's instructions for detailed information. Irs state tax forms    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. Irs state tax forms In most cases, this would occur in a refinancing or a restructuring of the mortgage. Irs state tax forms Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Irs state tax forms This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Irs state tax forms To qualify, you must meet the ownership and use tests described later. Irs state tax forms You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Irs state tax forms This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. Irs state tax forms You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. Irs state tax forms If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Irs state tax forms See Publication 505, Tax Withholding and Estimated Tax. Irs state tax forms Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Irs state tax forms You meet the ownership test. Irs state tax forms You meet the use test. Irs state tax forms During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Irs state tax forms For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. Irs state tax forms If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. Irs state tax forms You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Irs state tax forms Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Irs state tax forms This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Irs state tax forms Exception. Irs state tax forms   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Irs state tax forms However, the maximum amount you may be able to exclude will be reduced. Irs state tax forms See Reduced Maximum Exclusion , later. Irs state tax forms Example 1—home owned and occupied for at least 2 years. Irs state tax forms Mya bought and moved into her main home in September 2011. Irs state tax forms She sold the home at a gain in October 2013. Irs state tax forms During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Irs state tax forms She meets the ownership and use tests. Irs state tax forms Example 2—ownership test met but use test not met. Irs state tax forms Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Irs state tax forms He later sold the home for a gain in June 2013. Irs state tax forms He owned the home during the entire 5-year period ending on the date of sale. Irs state tax forms He meets the ownership test but not the use test. Irs state tax forms He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Irs state tax forms Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Irs state tax forms You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Irs state tax forms Example. Irs state tax forms Naomi bought and moved into a house in July 2009. Irs state tax forms She lived there for 13 months and then moved in with a friend. Irs state tax forms She later moved back into her house and lived there for 12 months until she sold it in August 2013. Irs state tax forms Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. Irs state tax forms Temporary absence. Irs state tax forms   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Irs state tax forms The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Irs state tax forms Example 1. Irs state tax forms David Johnson, who is single, bought and moved into his home on February 1, 2011. Irs state tax forms Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Irs state tax forms David sold the house on March 1, 2013. Irs state tax forms Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. Irs state tax forms The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Irs state tax forms Example 2. Irs state tax forms Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. Irs state tax forms Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Irs state tax forms He cannot exclude any part of his gain because he did not use the residence for the required 2 years. Irs state tax forms Ownership and use tests met at different times. Irs state tax forms   You can meet the ownership and use tests during different 2-year periods. Irs state tax forms However, you must meet both tests during the 5-year period ending on the date of the sale. Irs state tax forms Example. Irs state tax forms Beginning in 2002, Helen Jones lived in a rented apartment. Irs state tax forms The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Irs state tax forms In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Irs state tax forms On July 12, 2013, while still living in her daughter's home, she sold her condominium. Irs state tax forms Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Irs state tax forms She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Irs state tax forms She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Irs state tax forms The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Irs state tax forms Cooperative apartment. Irs state tax forms   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. Irs state tax forms Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Irs state tax forms Exception for individuals with a disability. Irs state tax forms   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Irs state tax forms Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Irs state tax forms   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Irs state tax forms Previous home destroyed or condemned. Irs state tax forms   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Irs state tax forms This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). Irs state tax forms Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Irs state tax forms Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Irs state tax forms   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Irs state tax forms You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. Irs state tax forms This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Irs state tax forms   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Irs state tax forms Example. Irs state tax forms John bought and moved into a home in 2005. Irs state tax forms He lived in it as his main home for 2½ years. Irs state tax forms For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Irs state tax forms He then sold the home at a gain in 2013. Irs state tax forms To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. Irs state tax forms This means he can disregard those 6 years. Irs state tax forms Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. Irs state tax forms He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Irs state tax forms Period of suspension. Irs state tax forms   The period of suspension cannot last more than 10 years. Irs state tax forms Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. Irs state tax forms You cannot suspend the 5-year period for more than one property at a time. Irs state tax forms You can revoke your choice to suspend the 5-year period at any time. Irs state tax forms Example. Irs state tax forms Mary bought a home on April 1, 1997. Irs state tax forms She used it as her main home until August 31, 2000. Irs state tax forms On September 1, 2000, she went on qualified official extended duty with the Navy. Irs state tax forms She did not live in the house again before selling it on July 31, 2013. Irs state tax forms Mary chooses to use the entire 10-year suspension period. Irs state tax forms Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. Irs state tax forms During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. Irs state tax forms She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. Irs state tax forms Uniformed services. Irs state tax forms   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. Irs state tax forms Foreign Service member. Irs state tax forms   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. Irs state tax forms A Chief of mission. Irs state tax forms An Ambassador at large. Irs state tax forms A member of the Senior Foreign Service. Irs state tax forms A Foreign Service officer. Irs state tax forms Part of the Foreign Service personnel. Irs state tax forms Employee of the intelligence community. Irs state tax forms   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. Irs state tax forms The Office of the Director of National Intelligence. Irs state tax forms The Central Intelligence Agency. Irs state tax forms The National Security Agency. Irs state tax forms The Defense Intelligence Agency. Irs state tax forms The National Geospatial-Intelligence Agency. Irs state tax forms The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. Irs state tax forms Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. Irs state tax forms The Bureau of Intelligence and Research of the Department of State. Irs state tax forms Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. Irs state tax forms Qualified official extended duty. Irs state tax forms   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. Irs state tax forms   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Irs state tax forms Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Irs state tax forms (But see Special rules for joint returns, next. Irs state tax forms ) Special rules for joint returns. Irs state tax forms   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Irs state tax forms You are married and file a joint return for the year. Irs state tax forms Either you or your spouse meets the ownership test. Irs state tax forms Both you and your spouse meet the use test. Irs state tax forms During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Irs state tax forms If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Irs state tax forms For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Irs state tax forms Example 1—one spouse sells a home. Irs state tax forms Emily sells her home in June 2013 for a gain of $300,000. Irs state tax forms She marries Jamie later in the year. Irs state tax forms She meets the ownership and use tests, but Jamie does not. Irs state tax forms Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Irs state tax forms The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Irs state tax forms Example 2—each spouse sells a home. Irs state tax forms The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Irs state tax forms He meets the ownership and use tests on his home, but Emily does not. Irs state tax forms Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Irs state tax forms However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Irs state tax forms Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Irs state tax forms The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Irs state tax forms Sale of main home by surviving spouse. Irs state tax forms   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Irs state tax forms   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Irs state tax forms The sale or exchange took place after 2008. Irs state tax forms The sale or exchange took place no more than 2 years after the date of death of your spouse. Irs state tax forms You have not remarried. Irs state tax forms You and your spouse met the use test at the time of your spouse's death. Irs state tax forms You or your spouse met the ownership test at the time of your spouse's death. Irs state tax forms Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. Irs state tax forms The ownership and use tests were described earlier. Irs state tax forms Example. Irs state tax forms Harry owned and used a house as his main home since 2009. Irs state tax forms Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. Irs state tax forms Harry died on August 15, 2013, and Wilma inherited the property. Irs state tax forms Wilma sold the property on September 1, 2013, at which time she had not remarried. Irs state tax forms Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Irs state tax forms Home transferred from spouse. Irs state tax forms   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Irs state tax forms Use of home after divorce. Irs state tax forms   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Irs state tax forms Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Irs state tax forms This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Irs state tax forms In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Irs state tax forms A change in place of employment. Irs state tax forms Health. Irs state tax forms Unforeseen circumstances. Irs state tax forms Qualified individual. Irs state tax forms   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. Irs state tax forms You. Irs state tax forms Your spouse. Irs state tax forms A co-owner of the home. Irs state tax forms A person whose main home is the same as yours. Irs state tax forms Primary reason for sale. Irs state tax forms   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. Irs state tax forms You qualify under a “safe harbor. Irs state tax forms ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. Irs state tax forms Safe harbors corresponding to the reasons listed above are described later. Irs state tax forms A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. Irs state tax forms  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. Irs state tax forms Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. Irs state tax forms Employment. Irs state tax forms   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. Irs state tax forms It also includes the start or continuation of self-employment. Irs state tax forms Distance safe harbor. Irs state tax forms   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). Irs state tax forms Example. Irs state tax forms Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. Irs state tax forms He got a job in North Carolina and sold his townhouse in 2013. Irs state tax forms Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Irs state tax forms Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. Irs state tax forms Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. Irs state tax forms The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. Irs state tax forms For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. Irs state tax forms Parent, grandparent, stepmother, stepfather. Irs state tax forms Child, grandchild, stepchild, adopted child, eligible foster child. Irs state tax forms Brother, sister, stepbrother, stepsister, half-brother, half-sister. Irs state tax forms Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. Irs state tax forms Uncle, aunt, nephew, niece, or cousin. Irs state tax forms Example. Irs state tax forms In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Irs state tax forms Lauren's father has a chronic disease and is unable to care for himself. Irs state tax forms In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Irs state tax forms Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. Irs state tax forms Doctor's recommendation safe harbor. Irs state tax forms   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. Irs state tax forms Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. Irs state tax forms You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. Irs state tax forms Specific event safe harbors. Irs state tax forms   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. Irs state tax forms An involuntary conversion of your home, such as when your home is destroyed or condemned. Irs state tax forms Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. Irs state tax forms In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. Irs state tax forms An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. Irs state tax forms For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. Irs state tax forms Reasonable basic living expenses. Irs state tax forms   Reasonable basic living expenses for your household include the following. Irs state tax forms Amounts spent for food. Irs state tax forms Amounts spent for clothing. Irs state tax forms Housing and related expenses. Irs state tax forms Medical expenses. Irs state tax forms Transportation expenses. Irs state tax forms Tax payments. Irs state tax forms Court-ordered payments. Irs state tax forms Expenses reasonably necessary to produce income. Irs state tax forms   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. Irs state tax forms Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. Irs state tax forms Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). Irs state tax forms Exceptions. Irs state tax forms   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Irs state tax forms Calculation. Irs state tax forms   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. Irs state tax forms   For examples of this calculation, see Business Use or Rental of Home , next. Irs state tax forms Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. Irs state tax forms Example 1. Irs state tax forms On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Irs state tax forms She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Irs state tax forms The house was rented from June 1, 2009, to March 31, 2011. Irs state tax forms Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Irs state tax forms Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Irs state tax forms During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Irs state tax forms Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Irs state tax forms Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. Irs state tax forms Example 2. Irs state tax forms William owned and used a house as his main home from 2007 through 2010. Irs state tax forms On January 1, 2011, he moved to another state. Irs state tax forms He rented his house from that date until April 30, 2013, when he sold it. Irs state tax forms During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Irs state tax forms Because it was rental property at the time of the sale, he must report the sale on Form 4797. Irs state tax forms Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Irs state tax forms Because he met the ownership and use tests, he can exclude gain up to $250,000. Irs state tax forms However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Irs state tax forms Depreciation after May 6, 1997. Irs state tax forms   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Irs state tax forms If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Irs state tax forms Unrecaptured section 1250 gain. Irs state tax forms   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. Irs state tax forms To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. Irs state tax forms Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. Irs state tax forms Worksheet 2. Irs state tax forms Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. Irs state tax forms Gain or (Loss) on Sale       1. Irs state tax forms   Selling price of home 1. Irs state tax forms     2. Irs state tax forms   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. Irs state tax forms     3. Irs state tax forms   Subtract line 2 from line 1. Irs state tax forms This is the amount realized 3. Irs state tax forms     4. Irs state tax forms   Adjusted basis of home sold (from Worksheet 1, line 13) 4. Irs state tax forms     5. Irs state tax forms   Gain or (loss) on the sale. Irs state tax forms Subtract line 4 from line 3. Irs state tax forms If this is a loss, stop here 5. Irs state tax forms 200,000   Part 2. Irs state tax forms Exclusion and Taxable Gain       6. Irs state tax forms   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. Irs state tax forms If none, enter -0- 6. Irs state tax forms 10,000   7. Irs state tax forms   Subtract line 6 from line 5. Irs state tax forms If the result is less than zero, enter -0- 7. Irs state tax forms 190,000   8. Irs state tax forms   Aggregate number of days of nonqualified use after 2008. Irs state tax forms If none, enter -0-. Irs state tax forms  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. Irs state tax forms 668   9. Irs state tax forms   Number of days taxpayer owned the property 9. Irs state tax forms 2,080   10. Irs state tax forms   Divide the amount on line 8 by the amount on line 9. Irs state tax forms Enter the result as a decimal (rounded to at least 3 places). Irs state tax forms But do not enter an amount greater than 1. Irs state tax forms 00 10. Irs state tax forms 0. Irs state tax forms 321   11. Irs state tax forms   Gain allocated to nonqualified use. Irs state tax forms (Line 7 multiplied by line 10) 11. Irs state tax forms 60,990   12. Irs state tax forms   Gain eligible for exclusion. Irs state tax forms Subtract line 11 from line 7 12. Irs state tax forms 129,010   13. Irs state tax forms   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). Irs state tax forms  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. Irs state tax forms If you do  not qualify to exclude gain, enter -0- 13. Irs state tax forms 250,000   14. Irs state tax forms   Exclusion. Irs state tax forms Enter the smaller of line 12 or line 13 14. Irs state tax forms 129,010   15. Irs state tax forms   Taxable gain. Irs state tax forms Subtract line 14 from line 5. Irs state tax forms Report your taxable gain as described under Reporting the Sale . Irs state tax forms If the amount on line 6 is more than zero, complete line 16 15. Irs state tax forms 70,990   16. Irs state tax forms   Enter the smaller of line 6 or line 15. Irs state tax forms Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. Irs state tax forms 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Irs state tax forms Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. Irs state tax forms In addition, you do not need to report the sale of the business or rental part on Form 4797. Irs state tax forms This is true whether or not you were entitled to claim any depreciation. Irs state tax forms However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. Irs state tax forms See Depreciation after May 6, 1997, earlier. Irs state tax forms Example 1. Irs state tax forms Ray sold his main home in 2013 at a $30,000 gain. Irs state tax forms He has no gains or losses from the sale of property other than the gain from the sale of his home. Irs state tax forms He meets the ownership and use tests to exclude the gain from his income. Irs state tax forms However, he used part of the home as a business office in 2012 and claimed $500 depreciation. Irs state tax forms Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. Irs state tax forms In addition, he does not have to report any part of the gain on Form 4797. Irs state tax forms Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. Irs state tax forms He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). Irs state tax forms Example 2. Irs state tax forms The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. Irs state tax forms Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. Irs state tax forms Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. Irs state tax forms Examples are: A working farm on which your house was located, A duplex in w
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Do I Have Cancellation of Debt Income on My Personal Residence?

Information You Will Need:

  • Filing Status
  • Form 1099-C, Cancellation of Debt, received from your mortgage lender

Note: This application is not designed to address the cancellation of debt that applies to a joint liability when debt was cancelled in bankruptcy and only 1 individual filed for bankruptcy. Please refer to Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals).

Estimated Completion Time: 10 minutes. However: 5 minutes of inactivity will end the interview and you will be forced to start over.

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Page Last Reviewed or Updated: 14-Feb-2014

The Irs State Tax Forms

Irs state tax forms Index Symbols 1099-C, Persons who each receive a Form 1099-C showing the full amount of debt. Irs state tax forms 501(c)(3) organizations, Section 501(c)(3) organization. Irs state tax forms A Abandonments, Abandonments Canceled debt, Canceled debt. Irs state tax forms Assistance (see Tax help) B Bankruptcy, Bankruptcy Reduction of tax attributes, Bankruptcy and Insolvency Business Real property indebtedness, Qualified Real Property Business Indebtedness C Canceled debt, Canceled Debts, Persons who each receive a Form 1099-C showing the full amount of debt. Irs state tax forms Exceptions Deductible debt, Deductible Debt Gifts, Gifts, Bequests, Devises, and Inheritances Price reduced after purchase, Price Reduced After Purchase Student loans, Student Loans Exclusions Bankruptcy, Bankruptcy Insolvency, Insolvency Qualified farm indebtedness, Qualified Farm Indebtedness Qualified principal residence indebtedness, Qualified Principal Residence Indebtedness Qualified real property business indebtedness, Qualified Real Property Business Indebtedness Co-owners, Persons who each receive a Form 1099-C showing the full amount of debt. Irs state tax forms D Debts Stockholder's, Stockholder debt Definitions Adjusted tax attributes, Adjusted tax attributes. Irs state tax forms Main home, Main home. Irs state tax forms Qualified acquisition indebtedness, Definition of qualified acquisition indebtedness. Irs state tax forms Qualified farm indebtedness, Qualified Farm Indebtedness Qualified principal residence indebtedness, Qualified Principal Residence Indebtedness Qualified real property business indebtedness, Qualified Real Property Business Indebtedness E Educational loans, Student Loans Exceptions Home Affordable Modification Program, Home Affordable Modification Program F Farm indebtedness, Qualified Farm Indebtedness Reduction of tax attributes, Qualified Farm Indebtedness Foreclosures, Foreclosures and Repossessions Form 1099-A, Forms 1099-A and 1099-C. Irs state tax forms , Forms 1099-A and 1099-C. Irs state tax forms 1099-C, Forms 1099-A and 1099-C. Irs state tax forms , Forms 1099-A and 1099-C. Irs state tax forms Free tax services, Free help with your tax return. Irs state tax forms G Gifts, Gifts, Bequests, Devises, and Inheritances H Help (see Tax help) Home Affordable Modification Program, Home Affordable Modification Program I Income from, Canceled Debts Income from canceled debt, Canceled Debts Insolvency, Insolvency Reduction of tax attributes, Bankruptcy and Insolvency L Limits Excluded farm debt, Exclusion limit. Irs state tax forms Excluded principal residence indebtedness, Exclusion limit. Irs state tax forms Qualified real property business indebtedness, Exclusion limit. Irs state tax forms Loans Student, Student Loans M Missing children, photographs of, Reminder Mortgage Debt Relief Act (see Qualified Principal Residence Indebtedness) P Principal residence indebtedness, Qualified Principal Residence Indebtedness Publications (see Tax help) Q Qualified farm indebtedness, Qualified Farm Indebtedness Reduction of tax attributes, Qualified Farm Indebtedness Qualified principal residence indebtedness, Qualified Principal Residence Indebtedness Reduction of tax attributes, Qualified Principal Residence Indebtedness Qualified real property business indebtedness, Qualified Real Property Business Indebtedness Reduction of tax attributes, Qualified Real Property Business Indebtedness R Real property business indebtedness, Qualified Real Property Business Indebtedness Recapture Basis reductions, Recapture of basis reductions. Irs state tax forms Repossessions, Foreclosures and Repossessions S Stockholder debts, Stockholder debt Student loans, Student Loans Suggestions for publication, Comments and suggestions. Irs state tax forms T Tax attributes, reduction of Bankruptcy, Bankruptcy and Insolvency Insolvency, Bankruptcy and Insolvency Qualified farm indebtedness, Qualified Farm Indebtedness Qualified principal residence indebtedness, Qualified Principal Residence Indebtedness Qualified real property business indebtedness, Qualified Real Property Business Indebtedness Tax help, How To Get Tax Help TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications