If you sell or exchange your home, you may be able to exclude up to
$250,000 ($500,000 for certain married persons filing a joint return)
of the gain on the sale or exchange if you meet the ownership and use
tests.
Ownership and use tests.
To claim the exclusion, you must meet the ownership and use tests.
This means that during the 5-year period ending on the date of the
sale, you met both the following tests.
- You owned the home for at least 2 years (ownership
test).
- You lived in the home as your main home for at least 2 years
(use test).
Business use during the ownership and use periods.
If you used part of your home for business during the ownership and
use periods, the exclusion generally applies only to the gain
attributable to the personal part of your home.
Depreciation.
If you were entitled to take depreciation deductions because you
used your home for business, you cannot exclude the part of
your gain equal to any depreciation allowed or allowable as a
deduction for periods after May 6, 1997. If you can show by adequate
records or other evidence that the depreciation deduction allowed was
less than the amount allowable, the amount you cannot exclude is the
depreciation allowed.
Basis adjustment.
If you used any part of your home for business, you must adjust the
basis of your home for any depreciation that was allowable for its
business use, even if you did not claim it. If you took less
depreciation than you could have under the method you properly
selected, you must decrease the basis by the amount you could have
taken under that method. If you took more depreciation than you should
have under the method you properly selected, you must decrease the
basis by the amount you should have deducted, plus the part of the
excess deducted that actually decreased your tax liability for any
year. For more information on reducing the basis of your property for
depreciation, see Publication 551.
More information.
This section covers only the basic rules for the sale or exchange
of your home. For more information, see Publication 523.
Previous | First | Next
Publication Index | 2001 Tax Help Archives | Tax Help Archives | Home
