If you sold or exchanged your home after May 6, 1997 you may be allowed to exclude up to $250,000 of gain ($500,000, if married filing a joint return) realized on the sale or exchange of your main home. The exclusion is allowed each time you sell or exchange your main home, generally no more frequently than once every two years. If a sale or contract was signed after May 6, 1997 but before August 5, 1997, you may use the postponement provision or the $125,000 one time exclusion. Select Topic 702.

If you sold your home under a contract that provides for part or all of the selling price to be paid in a later year, you made an installment sale. Select Topic 705 for more information.

To be eligible for an exclusion, your main home must have been owned by you and used as your main home for a period of at least two years out of the five years prior to its sale or exchange. You can meet the ownership and use tests during different two year periods. However, both tests must be met during the five-year period ending on the date of the sale. If you and your spouse file a joint return for the year of the sale, you can exclude gain if either of you qualified for the exclusion.

The maximum amount of gain you can exclude will be reduced if:

1. You owned a home on August 5, 1997,
2. You sold your home prior to August 5, 1999 and did not meet the ownership and use tests or,
3. Due to a change in health or employment you either did not meet the ownership and use tests or are excluding gain on the sale of another home after May 6, 1997.

To report the sale of your home with either a loss or an exclusion, file Form 2119 with your Form 1040 for the year of the sale. If you have a gain on the sale, you must file Schedule D in addition to the 2119.

For additional information on selling your home obtain Publication 523, Selling Your Home. Forms and publications can be downloaded from this site, or ordered by calling 1-800-829-3676.

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