How to report the sale of a home on US taxes?
In the U.S., selling real estate often comes with a significant Capital Gains Tax. To help homeowners, the IRS provides an appealing tax break known as the home sale exclusion.
IRS-CI has launched two major new initiatives:
I. What is the "Home Sale Exclusion"?
When you sell a property for a profit, the gain (the sales price minus the cost basis) must be reported as a capital gain. The home sale exclusion allows taxpayers to exclude a specific amount of that profit from their income, making it tax-free:
◆ Single filers: Up to $250,000 of the gain is tax-exempt.
◆ Married filing jointly: Up to $500,000 of the gain is tax-exempt.
II. Eligibility: The "2-out-of-5-Year" Rule
To qualify for this exclusion, the homeowner must meet both of the following tests within the five-year period leading up to the sale:
◆ Ownership Test
The homeowner must have owned the property for at least two years during the five-year period ending on the date of the sale. For those married filing jointly, only one spouse needs to meet the ownership test to qualify.
◆ Use Test
You must have used the home as your principal residence for at least two years (730 days or 24 months) during the five-year period ending on the date of the sale. Note: The two years of residence do not need to be continuous, as long as the cumulative time meets the requirement within the five-year window.
USCPA Sophie Luo (羅霞) reminds If you have plans to sell real estate in the U.S. or are involved in cross-border asset allocation, it is recommended to contact a professional U.S. tax expert early on. This ensures compliance while maximizing your tax benefits.
If you have any questions or need any further help,
please contact us at the USCPA Sophie Luo (羅霞) +886 980919600
or Email: ustaxproservice@gmail.com
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