New rule for employees of the intelligence community. If you are an employee of the intelligence community, you may be able to exclude from income a gain from selling your main home, even if you did not live in it for the required 2 years during the 5-year period ending on the date of sale. This choice applies to any sale of a main home after December 20, 2006. For more information, see Members of the uniformed services or Foreign Service or employees of the intelligence community under Period of Ownership and Use, later.

Vacant land used as part of main home destroyed by a hurricane. You may qualify to exclude from income gain from the sale of vacant land you owned and used as part of your main home that was destroyed by Hurricanes Katrina, Rita, or Wilma, if you sell vacant land within 3 years (instead of 2 years) from the date of destruction. For more information, see Vacant land under Main Home, later.

Gulf Opportunity Zone Act of 2005 (Act). This Act provides tax relief for persons affected by Hurricanes Katrina, Rita, and Wilma. Under this Act, the rules for recapture of a federal mortgage subsidy have changed if you received a qualified home improvement loan (QHIL) funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. For more information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, later.

Credits affecting the basis of a home. If you claimed the nonbusiness energy property credit or the residential energy efficient property credit, you must decrease the basis of your home by the amount of the credit claimed. See Adjusted Basis, later. For more information about these credits, see also Form 5695, Residential Energy Credits.

Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Mail it to the Internal Revenue Service Center for your old address. (Addresses for the Service Centers are on the back of the form.)

Home sold with undeducted points. If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of sale. See Points in Part I of Publication 936, Home Mortgage Interest Deduction.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication explains the tax rules that apply when you sell your main home. Generally, your main home is the one in which you live most of the time.

If you sold your main home in 2007, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). See Excluding the Gain, later. If you can exclude all of the gain, you do not need to report the sale on your tax return.

If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040). You may also have to include Form 4797, Sales of Business Property. See Reporting the Sale, later.

If you have a loss on the sale, you cannot deduct it on your return.

The main topics in this publication are:

Other topics include: