Department of the Treasury Contents

Internal Revenue Service

Future Developments . . . . . . . . . . . . . . . . . . . . . . . 1
Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Publication 523
Cat. No. 15044W Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Selling
Does Your Home Sale Qualify for the Exclusion
of Gain? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Eligibility Test . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Your Home Does Your Home Qualify for a Partial Exclusion

of Gain? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Figuring Gain or Loss . . . . . . . . . . . . . . . . . . . . . . . 8
For use in preparing Basis Adjustments—Details and Exceptions . . . . . 8

2023 Returns Property Used Partly for Business or Rental . . . . 12

Business or Rental Use of Home . . . . . . . . . . . . . 16
How Much Is Taxable? . . . . . . . . . . . . . . . . . . . . . 16
Recapturing Depreciation . . . . . . . . . . . . . . . . . 17
Reporting Your Home Sale . . . . . . . . . . . . . . . . . . 18
Reporting Gain or Loss on Your Home Sale . . . . 18
Reporting Deductions Related to Your Home
Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Reporting Other Income Related to Your
Home Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Paying Back Credits and Subsidies . . . . . . . . . . 20

How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . . 20

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Future Developments
For the latest information about developments related to
Pub. 523, such as legislation enacted after it was
published, go to IRS.gov/Pub523.

What’s New
Home energy tax credits. Home improvements that use
clean energy, or otherwise add to energy efficiency, may
qualify for home energy tax credits, which were extended,
increased, and/or modified by the Inflation Reduction Act,
P. L. 117-169, sections 13301 and 13302. These credits
are detailed in Energy credits and subsidies. See sections
25C and 25D. For more information, see IRS News Re-
lease 2023-97, available at IRS.gov/newsroom/irs-going-
green-could-help-taxpayers-qualify-for-expanded-home-
energy-tax-credits.

Get forms and other information faster and easier at:

Reminders
• IRS.gov (English) • IRS.gov/Korean (한국어) Photographs of missing children. The IRS is a proud
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский)
• IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt)
partner with the National Center for Missing & Exploited

Feb 7, 2024
Children® (NCMEC). Photographs of missing children se- To Get Tax Help section at the end of this publication, go
lected by the Center may appear in this publication on pa- to the IRS Interactive Tax Assistant page at IRS.gov/
ges that would otherwise be blank. You can help bring Help/ITA where you can find topics by using the search
these children home by looking at the photographs and feature or viewing the categories listed.
calling 800-THE-LOST (800-843-5678) if you recognize a
Getting tax forms, instructions, and publications.
child.
Go to IRS.gov/Forms to download current and prior-year
Special rules for capital gains invested in Qualified
forms, instructions, and publications.
Opportunity Funds. Effective December 22, 2017, sec-
tion 1400Z-2 provides a temporary deferral of inclusion in Ordering tax forms, instructions, and publications.
gross income for capital gains invested in Qualified Op- Go to IRS.gov/OrderForms to order current forms, instruc-
portunity Funds, and permanent exclusion of capital gains tions, and publications; call 800-829-3676 to order
from the sale or exchange of an investment in the Quali- prior-year forms and instructions. The IRS will process
fied Opportunity Fund if the investment is held for at least your order for forms and publications as soon as possible.
10 years. For more information, see the Instructions for Don’t resubmit requests you’ve already sent us. You can
Form 8949. get forms and publications faster online.
Extension of the exclusion of canceled or forgiven
mortgage debt from income. The exclusion of income Useful Items
for mortgage debt canceled or forgiven was extended You may want to see:
through December 31, 2025. The indebtedness dis-
charged must generally be on a qualified principal resi- Publication
dence, and based on an agreement in writing prior to Jan-
uary 1, 2026. See Report as ordinary income on Form 504 Divorced or Separated Individuals
504

1040, 1040-SR, or 1040-NR applicable canceled or for- 505 Tax Withholding and Estimated Tax
given mortgage debt, later.
505

527 Residential Rental Property

527

530 Tax Information for Homeowners

Introduction
530

537 Installment Sales

537

544 Sales and Other Dispositions of Assets

This publication explains the tax rules that apply when you
544

sell or otherwise give up ownership of a home. If you meet 547 Casualties, Disasters, and Thefts
547

certain conditions, you may exclude the first $250,000 of 551 Basis of Assets
gain from the sale of your home from your income and
551

avoid paying taxes on it. The exclusion is increased to 587 Business Use of Your Home
587

$500,000 for a married couple filing jointly. 936 Home Mortgage Interest Deduction
This publication also has worksheets for calculations
936

relating to the sale of your home. It will show you how to: 4681 Canceled Debts, Foreclosures,
Repossessions, and Abandonments
4681

1. Figure your maximum exclusion, using Worksheet 1,

5797 Home Energy Tax Credits
2. Determine if you have a gain or loss on the sale or ex-
5797

change of your home, using Worksheet 2, Form (and Instructions)

3. Figure how much of any gain is taxable (if any) using Schedule A (Form 1040) Itemized Deductions Schedule A (Form 1040)

Worksheet 3, and Schedule B (Form 1040) Interest and Ordinary

Dividends
Schedule B (Form 1040)

4. Report the transaction correctly on your tax return, us-

ing guidance included in Worksheet 3. Schedule D (Form 1040) Capital Gains and Losses Schedule D (Form 1040)

Comments and suggestions. We welcome your com- 982 Reduction of Tax Attributes Due to Discharge of
ments about this publication and suggestions for future Indebtedness (and Section 1082 Basis
982

editions. Adjustment)
You can send us comments through IRS.gov/
1040 U.S. Individual Income Tax Return
FormComments. Or, you can write to the Internal Revenue
1040

Service, Tax Forms and Publications, 1111 Constitution 1040-NR U.S. Nonresident Alien Income Tax Return
1040-NR

Ave. NW, IR-6526, Washington, DC 20224. 1040-SR U.S. Income Tax Return for Seniors
Although we can’t respond individually to each com-
1040-SR

ment received, we do appreciate your feedback and will 1099-S Proceeds From Real Estate Transactions
1099-S

consider your comments and suggestions as we revise 4797 Sales of Business Property
our tax forms, instructions, and publications. Don’t send
4797

tax questions, tax returns, or payments to the above ad- 5405 Repayment of the First-Time Homebuyer
Credit
5405

dress.
6252 Installment Sale Income
Getting answers to your tax questions. If you have
6252

a tax question not answered by this publication or the How 8822 Change of Address
8822

2 Publication 523 (2023)

 8828 Recapture of Federal Mortgage Subsidy
8828 2. Voter Registration Card,
8908 Energy Efficient Home Credit
8908

3. Federal and state tax returns, and

8949 Sales and Other Dispositions of Capital Assets
8949

4. Driver's license or car registration.

W-2 Wage and Tax Statement
W-2

• The home is near:

W-7 Application for IRS Individual Taxpayer 1. Where you work,
Identification Number
W-7

2. Where you bank,

3. The residence of one or more family members,
Does Your Home Sale Qualify and
for the Exclusion of Gain? 4. Recreational clubs or religious organizations of
which you are a member.
The tax code recognizes the importance of home owner- Finally, the exclusion can apply to many different types
ship by allowing you to exclude gain when you sell your of housing facilities. A single-family home, a condomin-
main home. To qualify for the maximum exclusion of gain ium, a cooperative apartment, a mobile home, and a
($250,000 or $500,000 if married filing jointly), you must houseboat each may be a main home and therefore qual-
meet the Eligibility Test, explained later. To qualify for a ify for the exclusion.
partial exclusion of gain, meaning an exclusion of gain
less than the full amount, you must meet one of the situa-
tions listed in Does Your Home Qualify for a Partial Exclu-
sion of Gain, later.
Eligibility Test
Before considering the Eligibility Test or whether your The Eligibility Test determines whether you are eligible for
home qualifies for a partial exclusion, you should consider the maximum exclusion of gain ($250,000 or $500,000 if
some preliminary items. married filing jointly).

Transfer of your home to a spouse or an ex-spouse. Eligibility Step 1—Automatic

Generally, if you transferred your home (or share of a
jointly owned home) to a spouse or ex-spouse as part of a
Disqualification
divorce settlement, you are considered to have no gain or Determine whether any of the automatic disqualifica-
loss. You have nothing to report from the transfer and this tions apply. Your home sale isn’t eligible for the exclu-
entire publication doesn’t apply to you. However, if your sion if ANY of the following are true.
spouse or ex-spouse is a nonresident alien, then you likely
will have a gain or loss from the transfer and the tests in • You acquired the property through a like-kind ex-
this publication apply. change (1031 exchange), during the past 5 years. See
Pub. 544, Sales and Other Dispositions of Assets.
Home’s date of sale. To determine if you meet the Eligi-
• You are subject to expatriate tax. For more information
bility Test or qualify for a partial exclusion, you will need to about expatriate tax, see chapter 4 of Pub. 519, U.S.
know the home's date of sale, meaning when you sold it. If Tax Guide for Aliens.
you received Form 1099-S, Proceeds From Real Estate
Transactions, the date of sale appears in box 1. If you If any of these conditions are true, the exclusion doesn’t
didn’t receive Form 1099-S, the date of sale is either the apply. Skip to Figuring Gain or Loss, later.
date the title transferred or the date the economic burdens
and benefits of ownership shifted to the buyer, whichever Eligibility Step 2—Ownership
date is earlier. In most cases, these dates are the same.
Determine whether you meet the ownership require-
Sale of your main home. You may take the exclusion, ment. If you owned the home for at least 24 months (2
whether maximum or partial, only on the sale of a home years) out of the last 5 years leading up to the date of sale
that is your principal residence, meaning your main home. (date of the closing), you meet the ownership requirement.
An individual has only one main home at a time. If you For a married couple filing jointly, only one spouse has to
own and live in just one home, then that property is your meet the ownership requirement.
main home. If you own or live in more than one home, then
you must apply a "facts and circumstances" test to deter- Eligibility Step 3—Residence
mine which property is your main home. While the most
important factor is where you spend the most time, other Determine whether you meet the residence require-
factors are relevant as well. They are listed below. The ment. If you owned the home and used it as your resi-
more of these factors that are true of a home, the more dence for at least 24 months of the previous 5 years, you
likely that it is your main home. meet the residence requirement. The 24 months of resi-
dence can fall anywhere within the 5-year period, and it
• The address listed on your: doesn't have to be a single block of time. All that is re-
1. U.S. Postal Service address, quired is a total of 24 months (730 days) of residence

Publication 523 (2023) 3

during the 5-year period. Unlike the ownership require- • You or your spouse (or former spouse) used the entire
ment, each spouse must meet the residence requirement property as a vacation home or rental after 2008. See
individually for a married couple filing jointly to get the full Business or Rental Use of Home.
exclusion.
Separated or divorced taxpayers. If you were separa-
If you were ever away from home, you need to de- ted or divorced prior to the sale of the home, you can treat
termine whether that time counts toward your residence the home as your residence if:
requirement. A vacation or other short absence counts as
time you lived at home (even if you rented out your home • You are a sole or joint owner, and
while you were gone). • Your spouse or former spouse is allowed to live in the
If you become physically or mentally unable to home under a divorce or separation agreement and
care for yourself, and you use the residence as your uses the home as his or her main home.
main home for at least 12 months in the 5 years preceding If your home was transferred to you by a spouse or
the sale or exchange, any time you spent living in a care ex-spouse (whether in connection with a divorce or not),
facility (such as a nursing home) counts toward your you can count any time when your spouse owned the
2-year residence requirement, so long as the facility has a home as time when you owned it. However, you must
license from a state or other political entity to care for peo- meet the residence requirement on your own. If you
ple with your condition. owned your home prior to your marriage and after your di-
vorce or separation, and your spouse or former spouse is
Eligibility Step 4—Look-Back not allowed to live in the home under a divorce or separa-
tion agreement, you count any time that you owned the
Determine whether you meet the look-back require- home solely or jointly with your spouse as time when you
ment. If you didn't sell another home during the 2-year owned it, and you must meet the residence requirement
period before the date of sale (or, if you did sell another on your own.
home during this period, but didn't take an exclusion of the
gain earned from it), you meet the look-back requirement. Surviving spouses. If you are a surviving spouse who
You may take the exclusion only once during a 2-year pe- doesn't meet the 2-year ownership and residence require-
riod. ments on your own, consider the following rule. If you
haven’t remarried at the time of the sale, then you may in-
Eligibility Step 5—Exceptions to the clude any time when your late spouse owned and lived in
the home, even if without you, to meet the ownership and
Eligibility Test residence requirements.
There are some exceptions to the Eligibility Test. If any of Also, you may be able to increase your exclusion
the following situations apply to you, read on to see if they amount from $250,000 to $500,000. You may take the
may affect your qualification. If none of these situations higher exclusion if you meet all of the following conditions.
apply, skip to Step 6. 1. You sell your home within 2 years of the death of your
• A separation or divorce occurred during the ownership spouse;
of the home. See Separated or divorced taxpayers. 2. You haven’t remarried at the time of the sale;
• The death of a spouse occurred during the ownership 3. Neither you nor your late spouse took the exclusion
of the home. See Surviving spouses. on another home sold less than 2 years before the
• The sale involved vacant land. See Vacant land next date of the current home sale; and
to home.
4. You meet the 2-year ownership and residence re-
• You owned a remainder interest, meaning the right to quirements (including your late spouse's times of
own a home in the future, and you sold that right. See ownership and residence, if applicable).
Remainder interest.
Service, Intelligence, and Peace Corps personnel. If
• Your previous home was destroyed or condemned. you or your spouse are a member of the Uniformed Serv-
See Home destroyed or condemned—considerations ices or the Foreign Service, an employee of the intelli-
for benefits. gence community of the United States, or an employee,
• You were a service member during the ownership of enrolled volunteer or volunteer leader of the Peace Corps,
the home. See Service, Intelligence, and Peace Corps you may choose to suspend the 5-year test period for
personnel. ownership and residence when you’re on qualified official
extended duty. This means you may be able to meet the
• You acquired or are relinquishing the home in a 2-year residence test even if, because of your service, you
like-kind exchange. See Like-kind/1031 exchange.
didn’t actually live in your home for at least the 2 years
• You used a portion of the real property, separate from during the 5-year period ending on the date of sale. Make
the living space, for business or rental use, and you the election by filing your tax return for the year of the sale
didn’t use any of the separate portion for residential or exchange of your main home, and exclude the gain
use for 2 years out of the 5 years leading up to the from your taxable income.
sale. See Property Used Partly for Business or Rental.

4 Publication 523 (2023)

 Qualified extended duty. You are on qualified exten- selling it on August 1, 2023. You choose to use the entire
ded duty if: 10-year suspension period. Therefore, the suspension pe-
riod would extend back from August 1, 2023, to August 2,
• You are called or ordered to active duty for an indefi-
2013, and the 5-year test period would extend back to Au-
nite period, or for a definite period of more than 90
gust 2, 2008. During that period, you owned the house all
days.
5 years and lived in it as your main home from August 2,
• You are serving at a duty station at least 50 miles from 2008, until August 28, 2010, a period of more than 24
your main home, or you are living in government quar- months. You meet the ownership and use tests because
ters under government orders. you owned and lived in the home for at least 2 years dur-
• You are one of the following: ing this test period.

1. A member of the armed forces (Army, Navy, Air Example 2. You bought and moved into a home in
Force, Marine Corps, Space Force, Coast Guard); 2014. You lived in it as your main home for 31/2 years. For
the next 6 years, you didn’t live in it because you were on
2. A member of the commissioned corps of the Na- qualified official extended duty with the Army. You then
tional Oceanic and Atmospheric Administration sold the home at a gain in 2023. To meet the use test, you
(NOAA) or the Public Health Service; choose to suspend the 5-year test period for the 6 years
3. A Foreign Service chief of mission, ambassa- you were on qualified official extended duty. This means
dor-at-large, or officer; you can disregard those 6 years. Therefore, your 5-year
test period consists of the 5 years before you went on
4. A member of the Senior Foreign Service or the qualified official extended duty. You meet the ownership
Foreign Service personnel; and use tests because you owned and lived in the home
5. An employee, enrolled volunteer, or enrolled vol- for 31/2 years during this test period.
unteer leader of the Peace Corps serving outside
the United States; or Vacant land next to home. You can include the sale of
vacant land adjacent to the land on which your home sits
6. An employee of the intelligence community, as part of a sale of your home if ALL of the following are
meaning: true.
a. The Office of the Director of National Intelli- • You owned and used the vacant land as part of your
gence, the Central Intelligence Agency, the home.
National Security Agency, the Defense Intelli-
gence Agency, the National Geospatial-Intelli-
• The sale of the vacant land and the sale of your home
occurred within 2 years of each other.
gence Agency, or the National Reconnais-
sance Office; • Both sales either meet the Eligibility Test or qualify for
partial tax benefits, as described earlier.
b. Any other office within the Department of De-
fense for the collection of specialized national Also, if your sale of vacant land meets all these require-
intelligence through reconnaissance pro- ments, you must treat that sale and the sale of your home
grams; as a single transaction for tax purposes, meaning that you
may apply the exclusion only once.
c. Any of the intelligence elements of the Army,
Navy, Air Force, Marine Corps, Federal Bureau Note. However, if you move your home from the land
of Investigation, Department of the Treasury, on which it stood (meaning you relocate the actual physi-
Department of Energy, and Coast Guard; cal structure), then that land no longer counts as part of
your home. For example, if you move a mobile home to a
d. The Bureau of Intelligence and Research of
new lot and sell the old lot, then you can’t treat the sale of
the Department of State; or
the old lot as the sale of your home.
e. Any of the elements of the Department of
Homeland Security concerned with the analy- Home destroyed or condemned—considerations for
ses of foreign intelligence information. benefits. If an earlier home of yours was destroyed or
condemned, you may be able to count your time there to-
Period of suspension. The period of suspension ward the ownership and residence test.
can’t last more than 10 years. Together, the 10-year sus- If your home was destroyed, see Pub. 547, Casualties,
pension period and the 5-year test period can be as long Disasters, or Thefts. If your home was condemned, see
as, but no more than, 15 years. You can’t suspend the Pub. 544, Sales and Other Disposition of Assets.
5-year period for more than one property at a time. You
can revoke your choice to suspend the 5-year period at
any time.

Example 1. You bought a home on May 1, 2007. You

used it as your main home until August 27, 2010. On Au-
gust 28, 2010, you went on qualified official extended duty
with the Navy. You didn’t live in the house again before

Publication 523 (2023) 5

Remainder interest. The sale of a remainder interest in for investment, or for productive use in a trade or busi-
your home is eligible for the exclusion only if both of the ness. For more information about like-kind exchanges, see
following conditions are met. Pub. 544.
For additional information about the intersection of sec-
• The buyer isn’t a “related party.” A related party can be
tions 121 and 1031, see Rev. Proc. 2005-14, 2005-7
a related person or a related corporation, trust, part-
I.R.B. 528, available at IRS.gov/irb/
nership, or other entity that you control or in which you
2005-07_IRB#RP-2005-14. Please note, however, that
have an interest.
any period after 2008 during which the property is not
• You haven't previously sold an interest in the home for used as a principal residence is, with certain exceptions,
which you took the exclusion. considered nonqualified use of that property for which
gain allocable to such period may not be excluded, in ac-
Like-kind/1031 exchange. If you sold a home that you cordance with section 121(b)(5). This includes property
acquired in a like-kind exchange, then the following test that is separate from the main property and not a part of
applies. the living area of the main home that is not used as a prin-
You can’t claim the exclusion if: cipal residence for a period after 2008. See section 121(b)
1. Either (a) or (b) applies: (5)(C). See also Rev. Proc. 2005-14 for examples that il-
lustrate how to allocate basis and gain realized in an ex-
a. You acquired your home in a like-kind exchange change that is also eligible for section 121 exclusion, as
(also known as a section 1031 exchange), or well as details of depreciation recapture.
b. Your basis in your home is determined by refer-
ence to a previous owner's basis, and that previ- Eligibility Step 6—Final Determination of
ous owner acquired the property in a like-kind ex- Eligibility
change (for example, the owner acquired the
home and then gave it to you); and If you meet the ownership, residence, and look-back re-
quirements, taking the exceptions into account, then you
2. You sold the home within 5 years of the date your meet the Eligibility Test. Your home sale qualifies for the
home was acquired in the like-kind exchange. maximum exclusion. Skip to Worksheet 1, later.
A main home is not available for exchange because the
exchange must be between like-kind real property held for If you didn’t meet the Eligibility Test, then your home
productive use in a trade or business or for investment. isn’t eligible for the maximum exclusion, but you should
Also, real property held primarily for sale is not eligible for continue to Does Your Home Qualify for a Partial Exclu-
deferral of gain under section 1031. For an exchange of sion of Gain.
rental property that was later converted to personal use as
a main home, there is a 5-year holding period required un- Does Your Home Qualify for a Partial
der section 121(d)(10). A separate 2-year holding period Exclusion of Gain?
is required for exchanges between related persons under
section 1031(f). See Pub. 544. If you don't meet the Eligibility Test, you may still qualify for
If you convert your main home to a rental property (or a partial exclusion of gain. You can meet the requirements
use a portion of the living area for productive use in a for a partial exclusion if the main reason for your home
trade or business as in Rev. Proc. 2005-14, examples 3– sale was a change in workplace location, a health issue,
6), the exchange rules under section 1031 and exclusion or an unforeseeable event.
of income rules under section 121 may both apply.
If the requirements of both sections 1031 and 121 are Work-Related Move
met, the section 121 exclusion is applied first to realized
gain; section 1031 then applies, including any gain attrib- You meet the requirements for a partial exclusion if any of
utable to depreciation deductions. Any cash received in the following events occurred during your time of owner-
exchange for the rental property is taken into account only ship and residence in the home.
to the extent the cash exceeds the section 121 excluded
• You took or were transferred to a new job in a work lo-
gain on the rental property given up in the exchange. The cation at least 50 miles farther from the home than
period before the exchange that is after the last date the your old work location. For example, your old work lo-
property was used as a main home is not considered non- cation was 15 miles from the home and your new work
qualified use for purposes of the proration rules of section location is 65 miles from the home.
121. To figure basis of the property received in the ex-
change (replacement property), any gain excluded under • You had no previous work location and you began a
section 121 is added to your basis of your replacement new job at least 50 miles from the home.
property, similar to the treatment of recognized gain. You • Either of the above is true of your spouse, a co-owner
can’t convert the replacement property to a main home of the home, or anyone else for whom the home was
immediately after the exchange per section 1031(a)(1), her or his residence.
which requires that replacement property be held either

6 Publication 523 (2023)

Health-Related Move 1. Died;

You meet the requirements for a partial exclusion if any of 2. Became divorced or legally separated, or were is-
the following health-related events occurred during your sued a separate decree to pay maintenance (sup-
time of ownership and residence in the home. port) to the other spouse;

• You moved to obtain, provide, or facilitate diagnosis, 3. Gave birth to two or more children from the same
cure, mitigation, or treatment of disease, illness, or in- pregnancy;
jury for yourself or a family member. 4. Became eligible for unemployment compensation;
• You moved to obtain or provide medical or personal 5. Became unable, because of a change in employ-
care for a family member suffering from a disease, ill- ment status, to pay basic living expenses for the
ness, or injury. A family member includes your: household (including expenses for food, clothing,
1. Parent, grandparent, stepmother, stepfather; housing, medication, transportation, taxes,
court-ordered payments, and expenses reasona-
2. Child (including adopted child, eligible foster
bly necessary for making an income).
child, and stepchild), grandchild;
6. An event is determined to be an unforeseeable
3. Brother, sister, stepbrother, stepsister, half
event in IRS published guidance.
brother, half sister;
4. Mother-in-law, father-in-law, brother-in-law, sis- Other Facts and Circumstances
ter-in-law, son-in-law, daughter-in-law;
Even if your situation doesn’t match any of the standard
5. Uncle, aunt, nephew, or niece.
requirements described above, you still may qualify for an
• A doctor recommended a change in residence for you exception. You may qualify if you can demonstrate the pri-
because you were experiencing a health problem. mary reason for sale, based on facts and circumstances,
• The above is true of your spouse, a co-owner of the is work related, health related, or unforeseeable. Impor-
home, or anyone else for whom the home was his or tant factors are:
her residence. • The situation causing the sale arose during the time
you owned and used your property as your residence.
Unforeseeable Events • You sold your home not long after the situation arose.
You meet the standard requirements if any of the following • You couldn’t have reasonably anticipated the situation
events occurred during the time you owned and lived in when you bought the home.
the home you sold.
• You began to experience significant financial difficulty
• Your home was destroyed or condemned. maintaining the home.
• Your home suffered a casualty loss because of a natu- • The home became significantly less suitable as a
ral or man-made disaster or an act of terrorism. (It main home for you and your family for a specific rea-
doesn’t matter whether the loss is deductible on your son.
tax return.)
• You, your spouse, a co-owner of the home, or anyone
else for whom the home was her or his residence:

Publication 523 (2023) 7

Worksheet 1. Find Your Exclusion Limit Keep for Your Records
Use this worksheet only if no automatic disqualifications apply, and take all exceptions into account.
A) Determine if you are eligible for the maximum exclusion limit.
Status You are eligible for the maximum exclusion if... Maximum If you’re not eligible for
exclusion the maximum exclusion
limit, then you should…
Married Both spouses meet the residence and look-back requirements $500,000 Determine if either spouse is
filing jointly and one or both spouses meet the ownership requirement. eligible for the full limit as a
single person. If not,
determine if either spouse is
eligible for a partial
exclusion.
Single, You meet the residence, ownership, and look-back $250,000 Determine if you are eligible
married requirements. for a partial exclusion.
filing
separately
Surviving 1. You sell your home within 2 years of the death of your $500,000 Determine if you are eligible
spouse spouse. for the full limit as a single
person. If not, determine if
2. You haven't remarried at the time of the sale. you are eligible for a partial
3. Neither you nor your late spouse took the exclusion on exclusion.
another home sold less than 2 years before the date of the
current home sale.
4. You meet the 2-year ownership and residence
requirements (including your late spouse's times of
ownership and residence, if applicable).
B) Complete this section only if you have determined that you aren’t eligible for the maximum exclusion but
are eligible for a partial exclusion. If you are eligible for a partial exclusion, use this section to determine
your exclusion limit.
Step 1 Determine the shortest of the following 3 periods:
1. Your time of residence in the home during the 5-year period leading up to the sale . . . .
2. Your time of ownership of the home leading up to the sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. The time that has elapsed between the sale and the date you last sold a home for which
you took the exclusion, if applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 2 Take the smallest period from Step 1 (you may use days or months) and divide that number
by 730 (if using days) or 24 (if using months) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.5
Step 3 Multiply the result from Step 2 by $250,000. This is the amount of your reduced exclusion.
For married filing jointly, continue to step 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 4 Repeat Steps 1–3 for your spouse and add the two results ............................
C) Your exclusion limit is $___________. Only gain in excess of this amount is taxable, unless you have gain from
full or partial business or rental use. For partial use as a business or rental, see Property Used Partly for Business or
Rental. For use of the entire property for business, rental, vacation, or any other use (other than personal use as a
main home), see Business or Rental Use of Home.
A positive number indicates a gain; a negative number
Figuring Gain or Loss indicates a loss.
Certain events during your ownership, such as use of
To figure the gain or loss on the sale of your main home, your home for business purposes or your making improve-
you must know the selling price, the amount realized, and ments to it, can affect your gain or loss. They are ex-
the adjusted basis. Subtract the adjusted basis from the plained in this section.
amount realized to get your gain or loss. See Worksheet 2, later, for steps you should follow to
figure your gain or loss.
Selling price
− Selling expenses Basis Adjustments—Details and
Amount realized Exceptions
− Adjusted basis
Gain or loss You should include many, but not all, costs associated with
the purchase and maintenance of your home in the basis

8 Publication 523 (2023)

of your home. For more information on determining basis, 6. Legal fees directly connected with building the
see Pub. 551, Basis of Assets. house.

Fees and Closing Costs Your cost includes your down payment and any debt
such as a first or second mortgage or notes you gave the
Some settlement fees and closing costs you can include seller or builder. It also includes certain settlement or clos-
in your basis are: ing costs. In addition, you must generally reduce your ba-
sis by points the seller paid you.
• Abstract fees (abstract of title fees),
If you built all or part of your house yourself, its basis is
• Charges for installing utility services,
the total amount it cost you to complete it. Don’t include in
• Legal fees (including fees for the title search and pre- the cost of the house:
paring the sales contract and deed),
• The value of your own labor, or
• Recording fees,
• The value of any other labor for which you didn’t pay.
• Survey fees,
Costs owed by the seller that you paid. You can in-
• Transfer or stamp taxes, and
clude in your basis any amounts the seller owes that you
• Owner's title insurance. agree to pay (as long as the seller doesn’t reimburse you),
such as:
Settlement costs don’t include amounts placed in es-
crow for the future payment of items such as taxes and in-
• Any real estate taxes owed up through the day before
the sale date,
surance.
• Back interest owed by the seller,
Some settlement fees and closing costs you can’t in-
• The seller's title recording or mortgage fees,
clude in your basis are:
• Charges for improvements or repairs that are the sell-
• Fire and casualty insurance premiums, er's responsibility (for example, lead paint removal),
• Rent for occupancy of the house before closing, and
• Charges for utilities or other services related to occu- • Sales commissions (for example, payment to the sell-
pancy of the house before closing, er's real estate agent).
• Any fee or cost that you deducted as a moving ex-
pense (allowed for certain fees and costs before Improvements
1994),
Improvements add to the value of your home, prolong its
• Charges connected with getting a mortgage loan, useful life, or adapt it to new uses. You add the cost of ad-
such as: ditions and improvements to the basis of your property.
1. Mortgage insurance premiums (including funding The following chart lists some examples of improve-
fees connected with loans guaranteed by the De- ments.
partment of Veterans Affairs),
2. Loan assumption fees,
3. Cost of a credit report,
4. Fee for an appraisal required by a lender,
5. Points (discount points, loan origination fees), and
• Fees for refinancing a mortgage.
Construction. If you contracted to have your house built
on the land you own, your basis is:
• The cost of the land, plus
• The amount it cost you to complete the house, includ-
ing:
1. The cost of labor and materials,
2. Any amounts paid to a contractor,
3. Any architect's fees,
4. Building permit charges,
5. Utility meter and connection charges, and

Publication 523 (2023) 9

Examples of Improvements That your home is damaged, increase your basis by the
Increase Basis amount you spend on repairs that restore the property to
Keep for Your Records its pre-casualty condition. However, you must adjust your
basis by any amount of insurance reimbursement you re-
Additions Systems ceive or expect to receive for casualty losses. See Work-
Bedroom Heating system sheet 2, line 5.
Bathroom Central air conditioning
Deck Furnace Energy credits and subsidies. If you included in your
basis the cost of any energy-related improvements (such
Garage Duct work
as a solar energy system), and you received any tax cred-
Porch Central humidifier
its or subsidies related to those improvements, you must
Patio Central vacuum
subtract those credits or subsidies from your total basis.
Air/water filtration systems Examples include:
Wiring
Security system • 1977–1987: Credit for home energy improvements,
Lawn & Grounds Lawn sprinkler system • 1992–present: Direct or indirect subsidy from a public
Landscaping utility for installations or modifications aimed at lower-
Driveway ing a home's electricity or natural gas usage or better
Walkway managing its energy demand,
Fence
• 2006–present: Credit for home energy efficiency im-
Retaining wall provements,
Swimming pool
• 2006–present: Credit for qualified solar electric prop-
erty expenditures, qualified solar water heating prop-
Exterior Plumbing
erty expenditures, and qualified battery storage prop-
Storm windows/doors Septic system erty expenditures,
New roof Water heater
New siding Soft water system • 2006–2007, 2009–present: Credit for energy improve-
Satellite dish Filtration system ments to non-business properties (windows, skylights,
exterior doors, heat pump, waterheater, biomass
Insulation Interior stoves, and boilers), and
Attic Built-in appliances • 2023–2032: Credit for home energy audits, involving
Walls Kitchen modernization an inspection and written report for a main home loca-
Floors Flooring ted in the United States (within the meaning of section
Pipes and duct work Wall-to-wall carpeting 121), as conducted and prepared by a certified home
Fireplace energy auditor.

Repairs done as part of larger project. You can in- Home Acquired Through a Trade
clude repair-type work if it is done as part of an extensive
remodeling or restoration job. For example, replacing bro- Traded for another home. When you trade your home
ken windowpanes is a repair, but replacing the same win- for a new one, you are treated as having sold your home
dow as part of a project of replacing all the windows in and purchased a new one. Your sale price is the trade-in
your home counts as an improvement. value you received for your home plus any mortgage or
other debt that the person taking your home as a trade-in
Examples of improvements you CAN’T include in assumed (took over) from you as part of the deal.
your basis. You can’t include:
Traded for other property. If you paid for your home by
• Any costs of repairs or maintenance that are neces- trading other property for it, the starting basis of your
sary to keep your home in good condition but don’t home is usually the fair market value of the property you
add to its value or prolong its life. Examples include traded.
painting (interior or exterior), fixing leaks, filling holes
or cracks, or replacing broken hardware. Home Foreclosed, Repossessed, or
• Any costs of any improvements that are no longer part Abandoned
of your home (for example, wall-to-wall carpeting that
you installed but later replaced). If your home was foreclosed on, repossessed, or aban-
• Any costs of any improvements with a life expectancy, doned, you may have ordinary income, gain, or loss. See
when installed, of less than 1 year. Pub. 4681, Canceled Debts, Foreclosures, Reposses-
sions, and Abandonments.
Exception. The entire job is considered an improve-
ment if items that would otherwise be considered repairs If you used part of your home for business or rental pur-
are done as part of an extensive remodeling or restoration poses, see Foreclosures and Repossessions in chapter 1
of your home. For example, if you have a casualty and of Pub. 544, for examples of how to figure gain or loss.

10 Publication 523 (2023)

Home Destroyed or Condemned Table 1. Exceptions to Using a Donor's
Adjusted Basis for a Home Received as a
You have a disposition when your home is destroyed or
Gift
condemned and you receive other property or money in
payment, such as insurance or a condemnation award. IF... AND... THEN...
This is treated as a sale and you may be able to exclude
at the time of your usage of the you must use the fair market
all or part of any gain that you have. If your home was de-
the gift, the donor’s adjusted value of the home at the time
stroyed, see Pub. 547. If your home was condemned, see donor’s basis as your basis of the gift as your basis (if
Pub. 544. adjusted basis results in a loss, using the fair market value
in the home results in a gain for you, then
Home Received in Divorce was more than you don’t need to recognize
the home’s fair that gain).
Home acquired after July 18, 1984. If your former market value,
spouse was the sole owner, your starting basis is the at the time of the donor paid gift you figure your basis by
same as your former spouse's adjusted basis just before the gift, the tax on the gift of the starting with the donor’s
you received the home. If you co-owned the home with donor’s home, adjusted basis at the time of
adjusted basis the gift and adding the federal
your spouse, add the adjusted basis of your spouse's
in the home gift tax paid due to the
half-share in the home to the adjusted basis of your own was less than increase in value of the home
half-share to get your starting basis. (In most cases, the the home’s fair (see Regulations section
adjusted basis of the two half-shares will be the same.) market value, 1.1015-5 for further details on
The rules apply whether or not you received anything in this calculation).
exchange for the home.

Home acquired on or before July 18, 1984. Your start- Home Inherited
ing basis will usually be the home's fair market value at the
Home acquired from a decedent who died before or
time you acquired it from your spouse or ex-spouse.
after 2010. If you inherited your home from a decedent
For more information, see Pub. 504, Divorced or Sepa-
who died before or after 2010, your basis is the fair market
rated Individuals. If you or your spouse or ex-spouse lived
value of the property on the date of the decedent's death
in a community property state, see Pub. 555, Community
(or the later alternate valuation date chosen by the per-
Property.
sonal representative of the estate). If a federal estate tax
return (Form 706) was filed or required to be filed, the
Home Received as a Gift value of the property listed on the estate tax return is your
basis. If Form 706 didn’t have to be filed, your basis in the
If you received your home as a gift, you should keep re-
home is the same as its appraised value at the date of
cords of the date you received it. Record the adjusted ba-
death, for purposes of state inheritance or transmission
sis of the donor at the time of the gift and the fair market
taxes. See section 1014 for details.
value of the home at the time of the gift. Also ask if the do-
nor paid any gift tax. As a general rule, you will use the do- Surviving spouse. If you are a surviving spouse and
nor’s adjusted basis at the time of the gift as your basis. you owned your home jointly, your basis in the home will
However, see Table 1 below to determine if any excep- change. The new basis for the interest your spouse owned
tions to this rule listed in the “IF” column apply. will be its fair market value on the date of death (or alter-
nate valuation date). The basis in your interest will remain
the same. Your new basis in the home is the total of these
two amounts.
If you and your spouse owned the home either as ten-
ants by the entirety or as joint tenants with right of survi-
vorship, you will each be considered to have owned
one-half of the home.

Example. 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. Your new basis
in the home is $75,000 ($25,000 for one-half of the adjus-
ted basis plus $50,000 for one-half of the fair market
value).
Community property. In community property states
(Arizona, California, Idaho, Louisiana, Nevada, New Mex-
ico, Texas, Washington, and Wisconsin), each spouse is
usually considered to own half of the community property.
When either spouse dies, the total fair market value of the

Publication 523 (2023) 11

community property becomes the basis of the entire prop- date of the sale. If you do not meet the use test for the
erty, including the part belonging to the surviving spouse. separate business or rental part of the property, an alloca-
For this rule to apply, at least half the value of the com- tion of the gain on the sale is required. For this purpose,
munity property interest must be includible in the dece- you must allocate the basis of the property and the
dent's gross estate, whether or not the estate must file a amount realized between the residential and nonresiden-
return. tial portions of the property using the same method of allo-
For more information about community property, see cation that you used to determine depreciation adjust-
Pub. 555, Community Property. ments. Report the sale of the business or rental part on
Form 4797. Note that space formerly used as business or
If you are selling a home in which you acquired an
rental will qualify for exclusion under section 121 if the use
! interest from a decedent who died in 2010, see
CAUTION Pub. 4895, Tax Treatment of Property Acquired
was converted to personal use for a total of 2 years, as
From a Decedent Dying in 2010, available at IRS.gov/pub/ long as the personal use was within the 5 years leading up
to the sale. See Regulations section 1.121-1(a).
irs-prior/p4895--2011.pdf, to determine your basis.
Business or rental usage calculations. If you use
Property Used Partly for Business or property partly as a home and partly for business or to
produce rental income, and the business or rental portion
Rental is not within the home’s living area, you need to make sep-
arate gain/loss calculations for the business and resi-
Calculation. If you use property partly as a home and
dence portions of your property. Make three copies of all
partly for business or to produce rental income, the treat-
pages of Worksheet 2. Label one copy “Total,” one copy
ment of any gain on the sale depends partly on whether
“Home,” and one copy “Business or Rental.”
the business or rental part of the property is part of your
Complete your “Total” worksheet using the figures for
home or separate from it. Treatment of any gain also de-
your property as a whole. Include the total amount you re-
pends on the use during the 5 years leading up to the
ceived, all of your basis adjustments, etc. Include the cost
sale. To figure the portion of the gain allocated to the pe-
of all improvements, whether you made them to the busi-
riod of nonresidential use, see Business or rental usage
ness space or the residential space.
calculations, later. See also Worksheet 2.
Determine your “business or rental percentage,” mean-
Space within the living area. If the part of your property ing the percentage of your property that you used for busi-
used for business or to produce rental income is within ness or rental. If you were entitled to take depreciation de-
your home, such as a room used as a home office for a ductions because you used a portion of your home for
business, you do not need to allocate gain on the sale of business purposes or as rental property, you can’t exclude
the property between the business part of the property the part of your gain equal to any depreciation allowed or
and the part used as a home. In addition, you do not need allowable as a deduction for periods after May 6, 1997.
to report the sale of the business or rental part on Form If you used part of your home for business or rental af-
4797. This is true whether or not you were entitled to claim ter May 6, 1997, you may need to pay back (“recapture”)
any depreciation. However, you cannot exclude the part of some or all of the depreciation you were entitled to take on
any gain equal to any depreciation allowed or allowable af- your property. “Recapturing” depreciation means you must
ter May 6, 1997, which must be recaptured and reported include it as ordinary income on your tax return. If you took
as ordinary income under section 1250(b)(3). Other exam- depreciation on your home on past tax returns, use the
ples of space within the living area include a rented spare same business or rental percentage that you used in de-
bedroom and attic space used as a home office. termining how much depreciation to take. If you didn’t take
depreciation on your home on past tax returns, compare
Space separate from the living area. You generally the size of your business or rental space to the size of the
can’t exclude gain on the separate portion of your property whole property and express this as a percentage. For ex-
used for business or to produce rental income. Regula- ample, if you have a building with three equal-sized sto-
tions section 1.121-1(e) provides that the use of a sepa- ries, and you live in the top two stories and use the ground
rate portion of your home for business or rental purposes floor for a store, then you are using 1/3 of the property and
does not qualify for exclusion under section 121, and this your business percentage is 33.3%.
may affect your gain or loss calculations. See Regulations For each number on your “Total” worksheet, figure the
section 1.121-1(e). Examples are: business-related portion of that number and enter it on
your “Business or Rental” worksheet. You may use differ-
• A working farm on which your house was located, ent methods to determine the business portion of different
• A duplex in which you lived in one unit and rented the numbers. Here are the three possible methods and the
other, or circumstances under which each method applies.
• A store building with an upstairs apartment in which • Dollar-amount method. Where a figure consists of
you lived. specific dollar amounts that relate to either the resi-
You can’t exclude gain on the separate part of your dence portion or the business portion of the property,
property used for business or to produce rental income the figure must be broken down by these dollar
unless you owned and lived in that part of your property amounts. For example, if the figure for improvements
for at least 2 years during the 5-year period ending on the to the property was $100,000, and all of that applied to

12 Publication 523 (2023)

 the residence portion, then the business portion of the non-residential purposes for more than 3 years during the
improvements would be zero. 5-year period preceding the sale. Stacey uses the entire
• “100% rule” for depreciation. The first item under house and the remaining 7 acres as a principal residence
line 5a in Worksheet 2 is a business depreciation item. for at least 2 years during the 5-year period preceding the
Any figure for this item is 100% a business figure. sale. For periods after May 6, 1997, Stacey claims depre-
ciation deductions of $9,000 for the non-residential use of
• Percentage method. Where a figure applies to the the stable. Stacey sells the entire property in 2014, realiz-
property as a whole (such as the sale price), the busi- ing a gain of $24,000. Stacey has no other section 1231 or
ness or rental portion is the figure multiplied by the capital gains or losses for 2014.
business portion percentage you calculated earlier. Because the stable and the 28 acres used in the busi-
Use the percentage method for all items that don’t re- ness are separate from the dwelling unit, the allocation
quire the dollar-amount or depreciation methods. rules apply and Stacey must allocate the basis and
The total you get on line 7 on your “Business” copy of amount realized between the portion of the property used
Worksheet 2 is the gain or loss related to the business or as a principal residence and the portion used for
rental portion of the property you sold. non-residential purposes based on their respective FMVs.
Next, complete your “Home” worksheet. For each num- Stacey creates three copies of Worksheet 2 and titles
ber, take the number from your “Total” worksheet, subtract them “Business or Rental,” “Home,” and “Total” to allocate
the number from your “Business or Rental” worksheet, basis and the amount realized for the different uses of the
and enter the result in your “Home” worksheet (for exam- property.
ple, subtract the number on line 1f of the "Business or Stacey determines that $14,000 of the gain is allocable
Rental" worksheet from the number on line 1f of your "To- to the non-residential-use portion of the property by com-
tal" worksheet), and enter the result on your "Home" work- pleting the copy of Worksheet 2 entitled “Business or
sheet. Rental.” Stacey determines that $10,000 of the gain is allo-
Now figure the totals on your “Home” worksheet. The cable to the portion of the property used as a residence by
total you get on line 7 on the “Home” copy of Worksheet 2 completing the copy of Worksheet 2 entitled “Home.” Sta-
is the gain or loss related to the home portion of the prop- cey must recognize the $14,000 of gain allocable to the
erty you sold. non-residential-use portion of the property ($9,000 of
Review the results of your “Home” and “Business” which is unrecaptured section 1250 gain, and $5,000 of
worksheets to determine your next step. When you have which is adjusted net capital gain). Stacey reports gain as-
completed each worksheet, you will know whether you sociated with the non-residential-use portion of the prop-
have a gain or loss on each part of your property. It is pos- erty on Form 4797. Stacey may have to complete Form
sible to have a gain on both parts, a loss on both parts, or 8949 and Schedule D (Form 1040). See the Instructions
a gain on one part and a loss on the other. For more infor- for Form 4797, Form 8949, and Schedule D (Form 1040).
mation about using any part of your home for business or Stacey transfers the gain from the “Home” worksheet to
as a rental property, see Pub. 587, Business Use of Your Worksheet 3, reviews the maximum amount available for
Home, and Pub. 527, Residential Rental Property. exclusion as figured on Worksheet 1, and determines that
the $10,000 gain from the residence portion is less than
For detailed information about figuring and report- the maximum amount available for exclusion from Work-
TIP ing depreciation associated with the business or sheet 1. The $10,000 gain on the property may be exclu-
rental use of your home, see Pub. 527. ded.
Complete Worksheet 2. Then see Table 2 to determine
your next steps. Worksheet 2 is used to figure the adjusted basis of your
home and your gain or (loss). You will figure your taxable
Example. The following example demonstrates sepa- gain (if any), on Worksheet 3, later.
rate calculations for business and residential uses.
Stacey owns property that consists of a house, a stable
and 35 acres. Stacey uses the stable and 28 acres for

Publication 523 (2023) 13

Worksheet 2. How To Figure Your Gain or Loss Keep for Your Records
DO NOT use this worksheet to determine your basis if you acquired an interest in your home from a decedent who
died in 2010 and whose executor filed Form 8939. See Home acquired from a decedent who died before or after 2010.
If you have questions as you work through these step-by-step instructions, or want examples of costs that can and
can’t be included, see Basis Adjustments—Details and Exceptions.
• If married filing jointly, figure gain or loss for both spouses together. If single or married filing separately,
figure gain or loss as an individual.
• If the home you sold had multiple owners, your gain or loss is the gain or loss on the entire sale multiplied by
your percentage of ownership.
• If you used any portion of the property for business or rental purposes, see Property Used Partly for
Business or Rental. See also Business or Rental Use of Home.
1. Determine the sale price. This is everything you received for selling your home.
a. All money (currency, check, wire transfer) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a.
b. The fair market value of any other property or services you received . . . . . . . . . . . . . . . . . . . . . . . . b.
c. The value of any notes, mortgages, or other debts that the buyer agreed to assume (take over)
as part of the sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c.
d. Any real estate taxes the buyer paid on your behalf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d.
e. Any amount you received for granting an option to buy your home, if the option was
exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.
f. Add lines 1a through 1e. This is your sale price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f.
• If you received payment for personal property, DON’T include it in the sale price.
• If you received payment or reimbursement from your employer because of a job
transfer, DON’T include the payment as part of the selling price. Your employer will include
it as wages in box 1 of your Form W-2.
• If you received Form 1099-S, the gross proceeds for the sale price should appear in
box 2. If box 4 is checked, the sale price included non-cash payments, and you need to
determine the value of these and add them to the figure in box 2.
• If you didn’t receive Form 1099-S, refer to your real estate transaction documents for
the total amount you received for your home.
2. Determine your selling expenses. These are the costs directly associated with selling your home.
a. Any sales commissions (for example, a real estate agent's sales commission) . . . . . . . . . . . . . . . a.
b. Any advertising fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.
c. Any legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c.
d. Any mortgage points or other loan charges you paid that would normally have been the buyer's
responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d.
e. Any other fees or costs to sell your home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.
f. Add lines 2a through 2e. These are your selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f.
3. Figure your “amount realized” (sale price minus selling expenses).
Line 1f minus line 2f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
4. Determine your “total basis” (the total amount you invested in your home). This includes what you paid
for your home as well as other money you may have spent that added to its value.
a. The amount you paid for your home (or if you built your home, the cost of the land). Include any
down payment and any amount you borrowed to pay for the home. For cooperative
apartments, include the value of the corporation stock you purchased. If you acquired your
home through inheritance, gift, bargain sale, trade, or anything except a fair market purchase,
see Basis Adjustments—Details and Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a.
b. Any settlement fees or closing costs you paid when you bought your home, except for
financing-related costs (such as seller-paid points). The settlement statement should list the
fees related to buying the home. See Basis Adjustments—Details and Exceptions and Fees
and Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.
c. Any real estate taxes or other costs you paid on behalf of the seller you bought your home from
(and for which the seller never paid you back) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c.
d. Any amounts you spent on construction or other improvements that are still part of your home
at the time of sale (not including costs of maintenance and repairs). See Basis
Adjustments—Details and Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d.
e. Any amounts you spent to repair damage to your home or the land on which it sits . . . . . . . . . . . e.
f. Any special assessments for local improvements (such as special tax or condominium
association assessments that aren’t merely for repairs or maintenance) . . . . . . . . . . . . . . . . . . . . . f.
g. Add lines 4a through 4f. This is your total basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.

14 Publication 523 (2023)

Worksheet 2. How To Figure Your Gain or Loss (continued) Keep for Your Records
5. Determine your “basis adjustments” (any payments, credits, or benefits you may need to deduct from
your basis).
a. Any depreciation you took or were allowed to take for the use of your home for business or
rental purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a.
b. Any casualty losses (such as flood or fire damage) you claimed as a deduction on a federal
tax return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b.
c. Any insurance payments you received or expect to receive for casualty losses . . . . . . . . . . . . . . c.
d. Any payments you received for granting an easement, conservation restriction, or
right-of-way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d.
e. Any energy credits or subsidies that effectively paid you back for improvements you included
in your total basis, including home energy audits by a certified home energy auditor. See
Basis Adjustments—Details and Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e.
f. Any adoption credits you claimed, or any nontaxable payments from an employer-sponsored
adoption assistance program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . f.
g. Any real estate taxes the seller paid on your behalf (and for which you never paid the seller
back). If you reimburse the seller, it doesn’t affect basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g.
h. Any mortgage points the seller paid for you when you bought your home, if one of the
following is true . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h.
• You bought your home between January 1, 1991, and April 3, 1994, AND you deducted
the points as home mortgage interest in the year paid, or
• You bought your home after April 3, 1994 (regardless of whether you deducted the points).
i. Any canceled or forgiven mortgage debt amount that was excluded before January 1, 2026,
due to a bankruptcy or insolvency and that you didn’t have to declare as income. (See Pub.
4681.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i.
j. Any sales tax you paid on your home (such as for a mobile home or houseboat) and then
claimed as a deduction on a federal tax return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . j.
k. The value of any temporary housing the builder of your home provided for you . . . . . . . . . . . . . . k.
• Use this equation: Contract price × Value of temporary housing ÷ (Value of temporary
housing + Value of new home)
l. Any gain you postponed from the sale of a previous home sold before May 7, 1997 . . . . . . . . . l.
m. Add lines 5a through 5l. This is your basis adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . m.
6. Figure your “adjusted basis” (total basis minus basis adjustments).
Line 4g minus line 5m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.
• If your adjusted basis is less than zero and you went through a mortgage workout or
other process resulting in forgiveness or cancellation of mortgage debt (“discharge of
qualified principal residence indebtedness”), don’t count any portion of your canceled
debt that is bringing your basis below zero.
7. Figure your gain or loss (amount realized minus adjusted basis).
Line 3 minus line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
• If the number is negative (adjusted basis is greater than amount realized), you sold your
home at a loss. You can’t deduct this loss, but you don’t need to pay any tax on the money
you received from selling your home. Skip to Reporting Your Home Sale, later.
• If the number is positive, you sold your home at a gain. Skip to How Much Is Taxable,
later, to see if Worksheet 3 is required.
If this is your separate worksheet for business use, don’t follow guidance on line 7. Report the
gain on Form 4797 because this gain is not excluded under section 121.

Publication 523 (2023) 15

Table 2. Does Your Home or Business Show a Gain or a
Loss? Keep for Your Records
IF... THEN...
your “Home” worksheet follow the instructions at the end of line 7, under Worksheet 2 for “If the number is negative.”
shows a loss,
your “Home” worksheet see How Much Is Taxable? and Worksheet 3 to find out how much of the gain on your “Home”
shows a gain, worksheet is taxable.
your “Business” DON’T follow the instructions at the end of line 7, under Worksheet 2. Instead, report the loss from
worksheet shows a loss, your “Business” worksheet on Form 4797, Sales of Business Property. Note. Your loss may be
limited. See the Instructions for Form 4797.
your “Business” you can’t exclude any of the gain shown on your “Business” worksheet. DON’T follow the instructions
worksheet shows a gain, at the end of line 7, under Worksheet 2. Instead, report the gain from your “Business” worksheet on
Form 4797.

Business or Rental Use of Home ness or as a rental property, see Pub. 587, Business Use
of Your Home, and Pub. 527, Residential Rental Property.
Nonqualified use of entire property after 2008. If you
fail to meet the requirements to qualify for the $250,000 or
$500,000 exclusion, you may still qualify for a reduced ex- How Much Is Taxable?
clusion. If you fail to meet the ownership and use tests, or
if you used a portion of your home for business or rental Review of the Eligibility Test. Generally, your home
purposes during your ownership, this type of usage may sale qualifies for the maximum exclusion, if all of the fol-
affect your gain or loss calculations. lowing conditions are true.
Gain from the sale or exchange of your main home isn’t
excludable from income if it is allocable to periods of non- • You didn’t acquire the property through a like-kind ex-
qualified use. Nonqualified use means any period after change in the past 5 years.
2008 where neither you nor your spouse (or your former • You aren’t subject to the expatriate tax.
spouse) used the property as your main home, with cer-
tain exceptions. • You owned the home for at least 2 of the last 5 years
and lived in the home for at least 2 (1 if you become
Exceptions. A period of nonqualified use does not in- disabled) of the last 5 years leading up to the date of
clude: the sale.*
1. Any portion of the 5-year period ending on the date of • For the 2 years before the date of the current sale, you
the sale or exchange after the last date you or your didn't sell another home on which you claimed the ex-
spouse (or former spouse) used the property as your clusion.
main home; • You didn’t use a portion of the home, outside of the liv-
2. Any period (not to exceed 10 years) during which you ing area, for business or rental purposes.
(or your spouse) are serving on qualified official ex- • You didn’t use the entire property for business or
tended duty: rental purposes, or as a second home, after 2008.
a. As a member of the uniformed services; • The sale doesn’t involve the transfer of vacant land or
b. As a member of the Foreign Service of the Uni- a remainder interest.**
ted States; or *If this condition isn’t met, your home sale may qualify
for a partial exclusion. The sale must involve one of the fol-
c. As an employee of the intelligence community;
lowing events experienced by you, your spouse, a
and
co-owner, or anyone else for whom the home was her or
3. Any other period of temporary absence (not to exceed his residence: a work-related move, a health-related
an aggregate period of 2 years) due to change of em- move, a death, a divorce, a pregnancy with multiple chil-
ployment, health conditions, or other unforeseen cir- dren, a change in employment status, a change in unem-
cumstances as may be specified by the IRS. See Eli- ployment compensation eligibility, or other unusual event.
gibility Step 5 Exceptions to the Eligibility Test, and **The transfer of vacant land or of a remainder interest
Does Your Home Sale Qualify for the Exclusion of may qualify for the maximum exclusion, but special rules
Gain?, earlier. apply in those situations.
For a step-by-step guide to determining whether your
Calculation. To figure the portion of the gain allocated to
home sale qualifies for the maximum exclusion, see Does
the period of nonqualified use, see Worksheet 3. For more
Your Home Sale Qualify for the Exclusion of Gain? above.
information about using any part of your home for busi-

16 Publication 523 (2023)

 If you qualify for an exclusion on your home sale, up to Example. Cartier owned and used a house as a main
$250,000 ($500,000 if married and filing jointly) of your home from 2015 through 2018. On January 1, 2019, Cart-
gain will be tax free. If your gain is more than that amount, ier moved to another state. Cartier rented the home from
or if you qualify only for a partial exclusion, then some of that date until April 30, 2021, when Cartier sold it. During
your gain may be taxable. This section contains the 5-year period ending on the date of sale (May 1,
step-by-step instructions for figuring out how much of your 2016–April 30, 2021), Cartier owned and lived in the
gain is taxable. See Worksheet 3, later, for assistance in house for more than 2 years. Because the period of non-
determining your taxable gain. qualified use does not include any part of the 5-year pe-
If you determined in Does Your Home Sale Qualify for riod after the last date Cartier lived in the home, there is no
the Exclusion of Gain, earlier, that your home sale doesn't period of nonqualified use. Because Cartier met the own-
qualify for any exclusion (either full or partial), then your ership and use tests, Cartier can exclude gain up to
entire gain is taxable. If you don’t have a gain, you owe no $250,000. However, Cartier can’t exclude the part of the
tax on the sale. In either case, you don’t need to complete gain equal to the depreciation Cartier claimed, or could
Worksheet 3 and you can skip to Reporting Your Home have claimed, for renting the house.
Sale, later. Worksheet 3 is used to help you figure taxable gain on
the sale or exchange of your home (if any), and how to re-
port it.
Recapturing Depreciation
If you completed “Business” and “Home” versions
If you were entitled to take depreciation deductions be- TIP of your gain/loss worksheet as described in Prop-
cause you used your home for business purposes or as erty Used Partly for Business or Rental, earlier,
rental property, you cannot exclude the part of your gain complete Worksheet 3 only for the “Home” version.
equal to any depreciation allowed or allowable as a de-
duction for periods after May 6, 1997. If you used all of
your home for business or rental after May 6, 1997, you
may need to pay back (“recapture”) some or all of the de-
preciation you were entitled to take on your property. “Re-
capturing” depreciation means you must include it as ordi-
nary income on your tax return.

Worksheet 3. Determine if You Have Taxable Gain Keep for Your Records
If you completed “Business” and “Home” versions of your gain/loss worksheet as described in Property Used Partly for
Business or Rental, earlier, complete this worksheet only for the “Home” version.

Section A. Determine your net gain. Complete this section only if you used any part of your home for
business or rental purposes between May 6, 1997, and the date of sale. Otherwise, skip to Section B.
Step 1 Enter your gain from line 7 of Worksheet 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 2 List the total of all depreciation deductions that you took or could have taken for
the use of your home for business or rental purposes between May 7, 1997, and
the date of sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 3 Subtract the sum of Step 2 from the amount listed in Section A, Step 1. This is
your net gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section B. Determine your nonqualified use gain. Complete this section only if the following apply: a) During
the time you owned the property there were periods of nonqualified use when neither you nor your spouse
(or your former spouse) used the entire property as your main home; b) the periods of nonqualified use
occurred after 2008; c) the periods of nonqualified use occurred before the last day the entire property was
used as your or your spouse’s (or your former spouse) main home prior to the date of sale. Do not include
any period of nonqualified use that occurred after the last day that you or your spouse (or former spouse)
used the entire property as your main home during the 5-year period prior to the date of sale.* Otherwise,
skip to Section C.
*Note. If the period of non-use was 1) for an aggregate of 2 years or less and due to a change in employment, a health
condition, or other "unforeseen circumstance" described in Does Your Home Qualify for a Partial Exclusion of Gain,
earlier; or 2) for 10 years or less and due to a "stop the clock" exception for certain military, intelligence, and Peace
Corps personnel described in Service, Intelligence, and Peace Corps Personnel, earlier, then you may skip Section B.
Step 1 Enter the amount from Section A, Step 1 or, if you skipped Section A, your gain
from line 7 of Worksheet 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Publication 523 (2023) 17

Step 2 Enter the total number of days after 2008 and before the date of sale that neither
you nor your spouse (or former spouse) used the entire home as a main
residence. Do not include any days that occurred after the last day that you or
your spouse (or former spouse) used the entire property as your main home
during the 5-year period prior to the date of sale. This number is your non-use
days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 3 Enter the total number of days you owned your home (counting all days, not just
days after 2008). This number is your number of days owned . . . . . . . . . . . . . . . . .
Step 4 Divide the non-use days by the days owned. This number is your non-residence
factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 5 Multiply the decimal from Section B, Step 4, by the amount listed in Section B,
Step 1. This number is your nonqualified use gain . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section C. Determine your gain that is eligible for exclusion.
IF... THEN your gain that is eligible for exclusion is …
you skipped Sections A your gain from line 7, under Worksheet 2.
and B
you completed Section your net gain, from Section A, Step 3.
A but skipped Section B
you completed Section your gain from line 7, under Worksheet 2 less your nonqualified use gain, from Section B,
B (regardless of whether Step 5.
you completed Section
A)

Your gain that is eligible for exclusion is $ _______________

Section D. Determine if you have taxable gain.
IF... THEN …
your gain that is eligible your gain that is eligible for exclusion from your income is not to be reported on your tax
for exclusion from return. The Reporting Your Home Sale section only applies to your nonqualified use gain.
Section C is less than or
equal to your exclusion
limit from Worksheet 1,
Section C
your gain that is eligible some of your gain isn’t excludable, and you may owe tax on it. See Reporting Your Home
for exclusion from Sale for instructions on how to report the gain on your tax return.
Section C is greater than
your exclusion limit from
Worksheet 1, Section C

Reporting Gain or Loss on Your Home

Reporting Your Home Sale Sale
This section tells you how to report taxable gain, take de- Determine whether you need to report the gain from
ductions relating to your home sale, and report income your home. You need to report the gain if ANY of the fol-
other than the gain that you may have received from your lowing is true.
home sale. • You have taxable gain on your home sale (or on the
This section also covers special circumstances that ap- residential portion of your property if you made sepa-
ply to some home sellers. rate calculations for home and business) and don’t
qualify to exclude all of the gain.
What records to keep. Any time you buy real es-
TIP tate, you should keep records to document the • You received a Form 1099-S. If so, you must report the
property's adjusted basis. In general, keep these sale on Form 8949 even if you have no taxable gain to
records until 3 years after the due date for your tax return report. See Instructions for Form 8949 and Instruc-
for the year in which you sold your home. tions for Schedule D (Form 1040) for more details.
• You wish to report your gain as a taxable gain even
though some or all of it is eligible for exclusion. You
may wish to do this if, for example, you plan to sell an-
other main home within the next 2 years and are likely
to receive a larger gain from the sale of that property. If
you later choose to report, rather than exclude, your
taxable gain, you can undo that choice by filing an

18 Publication 523 (2023)

 amended return within 3 years of the due date of your QOF if the investment is held for at least 10 years. For
return for the year of the sale, excluding extensions. more information, see the Instructions for Form 8949.
If NONE of the three bullets above is true, you don’t
need to report your home sale on your tax return. If you Complete Schedule D (Form 1040), Capital Gains and
didn’t make separate home and business calculations on Losses. Using the information on Form 8949, report on
your property, skip to Reporting Deductions Related to Schedule D (Form 1040) the gain or loss on your home as
Your Home Sale, later. a capital gain or loss. Follow the instructions for Sched-
If ANY of the three bullets above is true, skip to Deter- ule D when completing the form.
mine whether your home sale is an installment sale, later. If you have any taxable gain from the sale of your home,
you may have to increase your withholding or make esti-
If you made separate gain/loss calculations for mated tax payments. See Pub. 505, Tax Withholding and
business and residence portions of your property, Estimated Tax.
you may have to use Form 4797 to report the sale of the
business or rental part. See Property Used Partly for Busi-
ness or Rental, earlier. Reporting Deductions Related to Your
Home Sale
Determine whether your home sale is an installment
sale. If you finance the buyer's purchase of your home If you aren’t itemizing deductions on your return for the
(you hold a note, mortgage, or other financial agreement), year in which you sold your home, skip to Reporting Other
you probably have an installment sale. You may be able to Income Related to Your Home Sale, later.
report any non-excludable gain on an installment basis.
There is no tax deduction for transfer taxes, stamp
Use Form 6252, Installment Sale Income, to report the
taxes, or other taxes, fees, and charges you paid when
sale.
you sold your home. However, if you paid these amounts
For more information, see Pub. 537, Installment Sales.
as the seller, you can treat these taxes and fees as selling
Report any interest you receive from the buyer. If the expenses. If you pay these amounts as the buyer, include
buyer is making payments to you over time (as when you them in your cost basis of the property.
provide seller financing), then you must generally report
Determine the amount of real estate tax deductions
part of each payment as interest on your tax return. Report
associated with your home sale. Depending on your
the interest portion of the payment as ordinary income on
circumstances, you may need to figure your real estate tax
Form 1040 or 1040-SR, line 2b, or Schedule NEC (Form
deductions differently. See the discussion that follows for
1040-NR) if a nonresident alien. If the buyer is using the
more information.
property as a first or second home, also report the interest
on Schedule B (Form 1040), Interest and Ordinary Divi- If you didn’t receive a Form 1099-S, use the follow-
dends, and provide the buyer's name, address, and social ing method to compute your real estate tax deduction,
security number. If you don’t show the buyer’s name, ad- which may be different from the amount of real estate tax
dress, and SSN you may have to pay a $50 penalty. you actually paid.
If you’re a nonresident or resident alien who • Divide the number of days you owned the property
doesn’t have and isn’t eligible to get a social security during the year of sale, not counting the date of sale,
number, you may be issued an individual taxpayer identi- by 365 (or 366 for a leap year).
fication number (ITIN). If you don’t have an ITIN, apply for • Multiply that figure by the amount of real estate tax
one by filing Form W-7, Application for IRS Individual Tax- due on the home during the 12-month billing cycle that
payer Identification Number. If needed, a nonresident or contains the date of sale. The result is the amount of
resident alien buyer can apply for an ITIN as well. real estate tax you can deduct as an itemized deduc-
Complete Form 8949, Sales and Other Dispositions tion.
of Capital Assets. Use Form 8949 to report gain from Example. The real estate tax on Jackie and Pat
the sale or disposition of the personal-use portion of your White's home was $620 for the year. Their real property
home if you can’t exclude the gain. If you received Form tax year was the calendar year, with payment due August
1099-S, report the transaction on Form 8949. See the In- 3, 2023. They sold the home on May 6, 2023. Jackie and
structions for Form 8949. Pat are considered to have paid a proportionate share of
If you have gain that can’t be excluded, you must the real estate taxes on the home even though they didn’t
TIP generally report it on Form 8949, Sales and Other actually pay them to the taxing authority.
Dispositions of Capital Assets, and Schedule D Jackie and Pat owned their home during the 2023 real
(Form 1040), Capital Gains and Losses. Report the sale property tax year for 125 days (January 1 to May 5, the
on Part I or Part II of Form 8949 as a short-term or day before the sale). They figure their deduction for taxes
long-term transaction, depending on how long you owned as follows.
the home. In addition, you may be able to temporarily de-
fer capital gains invested in a Qualified Opportunity Fund
(QOF). You may also be able to permanently exclude cap-
ital gains from the sale or exchange of an investment in a

Publication 523 (2023) 19

1. Total real estate taxes for the real property tax year . . $620 Paying Back Credits and Subsidies
2. Number of days in the real property tax year that you
125
owned the property . . . . . . . . . . . . . . . . . . . . . . If you received any homebuyer credits or federal mortgage
3. Divide line 2 by 365 (366 if leap year) . . . . . . . . . . . 0.342 subsidies, you may have to pay back (“recapture”) some
4. Multiply line 1 by line 3. This is your deduction. Enter it or all of the amount by increasing your tax payment.
on line 5b of Schedule A (Form 1040) . . . . . . . . . . . $212
Determine any amounts you may have claimed as a
Since the buyers paid all of the taxes, Jackie and Pat also first-time homebuyer tax credit. If you bought your
include the $212 in the home's selling price. The buyers home in 2008, you must pay back the credit unless you
add the $212 to their basis in the home. The buyers can qualify for an exception.
deduct $408 ($620 – $212) as an itemized deduction, the See Form 5405, Repayment of the First-Time Home-
taxes for the part of the year they owned the home. buyer Credit, to find out how much to pay back, or if you
If you received a Form 1099-S, start with the amount qualify for any exceptions. If you do have to repay the
of real estate tax you actually paid in the year of sale. Sub- credit, file Form 5405 with your tax return.
tract the buyer's share of real estate tax as shown in
box 6. The result is the amount you can use in figuring Determine any amounts you may have received in
your itemized deductions. federal mortgage subsidies in the 9 years leading up
to the date of sale. If you financed your home under a
If you didn’t already deduct all your mortgage federally subsidized program (loans from tax-exempt
points on an earlier tax return, you may be able to de- qualified mortgage bonds or loans with mortgage credit
duct them on your tax return for the year of sale. See Pub. certificates), you may have to recapture all or part of the
936, Home Mortgage Interest Deduction. benefit you received from that program upon the sale or
other transfer of ownership of your home. You recapture
Report on Schedule A (Form 1040), Itemized Deduc- the benefit by increasing your federal income tax for the
tions, any itemized real estate deduction. Follow the year of the sale. You may have to pay this recapture tax
Instructions for Schedule A when completing the form. even if you can exclude your gain from income under the
rules discussed earlier; that exclusion doesn’t affect the
Reporting Other Income Related to recapture tax.
Your Home Sale See Form 8828, Recapture of Federal Mortgage Sub-
sidy, to find out how much to repay, or whether you qualify
Report as ordinary income on Form 1040, 1040-SR, for any exceptions.
or 1040-NR any amounts received from selling per- If you did receive any federal mortgage subsidies, you
sonal property. If you sold furniture, drapes, lawn equip- must file Form 8828 with your tax return whether you sold
ment, a washer/dryer, or other property that wasn’t a per- your home at a loss or a gain. If you had a loss, you won't
manent part of your home, report the amount you received have to pay back any subsidy.
for the items as ordinary income. Report this amount on
Schedule 1 (Form 1040), line 8z, or Schedule NEC (Form
1040-NR) if a nonresident alien. The selling price of your
home doesn’t include amounts you received for personal
How To Get Tax Help
property sold with your home. If you have questions about a tax issue; need help prepar-
ing your tax return; or want to download free publications,
Report as ordinary income on Form 1040, 1040-SR,
forms, or instructions, go to IRS.gov to find resources that
or 1040-NR any amounts received for sales of ex-
can help you right away.
pired options to purchase your property. If you gran-
ted someone an option to buy your home and it expired in Preparing and filing your tax return. After receiving all
the year of sale, report the amount you received for the your wage and earnings statements (Forms W-2, W-2G,
option as ordinary income. Report this amount on Sched- 1099-R, 1099-MISC, 1099-NEC, etc.); unemployment
ule 1 (Form 1040), line 8z, or Schedule NEC (Form compensation statements (by mail or in a digital format) or
1040-NR) if a nonresident alien. other government payment statements (Form 1099-G);
and interest, dividend, and retirement statements from
Report as ordinary income on Form 1040, 1040-SR,
banks and investment firms (Forms 1099), you have sev-
or 1040-NR applicable canceled or forgiven mort-
eral options to choose from to prepare and file your tax re-
gage debt. If you went through a mortgage workout, fore-
turn. You can prepare the tax return yourself, see if you
closure, or other process in which a lender forgave or can-
qualify for free tax preparation, or hire a tax professional to
celed mortgage debt on your home, then you must
prepare your return.
generally report the amount of forgiven or canceled debt
as income on your tax return. However, if you had a written Free options for tax preparation. Your options for pre-
agreement for the forgiveness of the debt in place before paring and filing your return online or in your local com-
January 1, 2026, then you might be able to exclude the munity, if you qualify, include the following.
forgiven amount from your income. For more information,
see Pub. 4681, Canceled Debts, Foreclosures, Reposses- • Free File. This program lets you prepare and file your
sions, and Abandonments. federal individual income tax return for free using

20 Publication 523 (2023)

 software or Free File Fillable Forms. However, state • IRS.gov/Forms: Find forms, instructions, and publica-
tax preparation may not be available through Free File. tions. You will find details on the most recent tax
Go to IRS.gov/FreeFile to see if you qualify for free on- changes and interactive links to help you find answers
line federal tax preparation, e-filing, and direct deposit to your questions.
or payment options.
• You may also be able to access tax information in your
• VITA. The Volunteer Income Tax Assistance (VITA) e-filing software.
program offers free tax help to people with
low-to-moderate incomes, persons with disabilities,
Need someone to prepare your tax return? There are
and limited-English-speaking taxpayers who need
various types of tax return preparers, including enrolled
help preparing their own tax returns. Go to IRS.gov/
agents, certified public accountants (CPAs), accountants,
VITA, download the free IRS2Go app, or call
and many others who don’t have professional credentials.
800-906-9887 for information on free tax return prepa-
If you choose to have someone prepare your tax return,
ration.
choose that preparer wisely. A paid tax preparer is:
• TCE. The Tax Counseling for the Elderly (TCE) pro-
gram offers free tax help for all taxpayers, particularly • Primarily responsible for the overall substantive accu-
racy of your return,
those who are 60 years of age and older. TCE volun-
teers specialize in answering questions about pen- • Required to sign the return, and
sions and retirement-related issues unique to seniors.
• Required to include their preparer tax identification
Go to IRS.gov/TCE or download the free IRS2Go app number (PTIN).
for information on free tax return preparation.
Although the tax preparer always signs the return,
• MilTax. Members of the U.S. Armed Forces and quali- you're ultimately responsible for providing all the
fied veterans may use MilTax, a free tax service of- !
CAUTION information required for the preparer to accurately
fered by the Department of Defense through Military prepare your return and for the accuracy of every item re-
OneSource. For more information, go to ported on the return. Anyone paid to prepare tax returns
MilitaryOneSource (MilitaryOneSource.mil/MilTax). for others should have a thorough understanding of tax
Also, the IRS offers Free Fillable Forms, which can matters. For more information on how to choose a tax pre-
be completed online and then e-filed regardless of in- parer, go to Tips for Choosing a Tax Preparer on IRS.gov.
come.

Using online tools to help prepare your return. Go to Employers can register to use Business Services On-
IRS.gov/Tools for the following. line. The Social Security Administration (SSA) offers on-
• The Earned Income Tax Credit Assistant (IRS.gov/ line service at SSA.gov/employer for fast, free, and secure
EITCAssistant) determines if you’re eligible for the W-2 filing options to CPAs, accountants, enrolled agents,
earned income credit (EIC). and individuals who process Form W-2, Wage and Tax
Statement, and Form W-2c, Corrected Wage and Tax
• The Online EIN Application (IRS.gov/EIN) helps you Statement.
get an employer identification number (EIN) at no
cost. IRS social media. Go to IRS.gov/SocialMedia to see the
• The Tax Withholding Estimator (IRS.gov/W4App) various social media tools the IRS uses to share the latest
makes it easier for you to estimate the federal income information on tax changes, scam alerts, initiatives, prod-
tax you want your employer to withhold from your pay- ucts, and services. At the IRS, privacy and security are our
check. This is tax withholding. See how your withhold- highest priority. We use these tools to share public infor-
ing affects your refund, take-home pay, or tax due. mation with you. Don’t post your social security number
(SSN) or other confidential information on social media
• The First-Time Homebuyer Credit Account Look-up sites. Always protect your identity when using any social
(IRS.gov/HomeBuyer) tool provides information on
networking site.
your repayments and account balance. The following IRS YouTube channels provide short, in-
• The Sales Tax Deduction Calculator (IRS.gov/ formative videos on various tax-related topics in English,
SalesTax) figures the amount you can claim if you Spanish, and ASL.
itemize deductions on Schedule A (Form 1040).
• Youtube.com/irsvideos.
Getting answers to your tax questions. On
• Youtube.com/irsvideosmultilingua.
IRS.gov, you can get up-to-date information on
current events and changes in tax law. • Youtube.com/irsvideosASL.
• IRS.gov/Help: A variety of tools to help you get an- Watching IRS videos. The IRS Video portal
swers to some of the most common tax questions. (IRSVideos.gov) contains video and audio presentations
• IRS.gov/ITA: The Interactive Tax Assistant, a tool that for individuals, small businesses, and tax professionals.
will ask you questions and, based on your input, pro-
vide answers on a number of tax topics.

Publication 523 (2023) 21

Online tax information in other languages. You can • Access your tax records, including key data from your
find information on IRS.gov/MyLanguage if English isn’t most recent tax return, and transcripts.
your native language.
• View digital copies of select notices from the IRS.
Free Over-the-Phone Interpreter (OPI) Service. The • Approve or reject authorization requests from tax pro-
IRS is committed to serving taxpayers with limited-English fessionals.
proficiency (LEP) by offering OPI services. The OPI Serv-
ice is a federally funded program and is available at Tax-
• View your address on file or manage your communica-
tion preferences.
payer Assistance Centers (TACs), most IRS offices, and
every VITA/TCE tax return site. The OPI Service is acces- Get a transcript of your return. With an online account,
sible in more than 350 languages. you can access a variety of information to help you during
the filing season. You can get a transcript, review your
Accessibility Helpline available for taxpayers with
most recently filed tax return, and get your adjusted gross
disabilities. Taxpayers who need information about ac-
income. Create or access your online account at IRS.gov/
cessibility services can call 833-690-0598. The Accessi-
Account.
bility Helpline can answer questions related to current and
future accessibility products and services available in al- Tax Pro Account. This tool lets your tax professional
ternative media formats (for example, braille, large print, submit an authorization request to access your individual
audio, etc.). The Accessibility Helpline does not have ac- taxpayer IRS online account. For more information, go to
cess to your IRS account. For help with tax law, refunds, or IRS.gov/TaxProAccount.
account-related issues, go to IRS.gov/LetUsHelp.
Using direct deposit. The safest and easiest way to re-
Note. Form 9000, Alternative Media Preference, or ceive a tax refund is to e-file and choose direct deposit,
Form 9000(SP) allows you to elect to receive certain types which securely and electronically transfers your refund di-
of written correspondence in the following formats. rectly into your financial account. Direct deposit also
• Standard Print. avoids the possibility that your check could be lost, stolen,
destroyed, or returned undeliverable to the IRS. Eight in
• Large Print. 10 taxpayers use direct deposit to receive their refunds. If
• Braille. you don’t have a bank account, go to IRS.gov/
DirectDeposit for more information on where to find a bank
• Audio (MP3).
or credit union that can open an account online.
• Plain Text File (TXT).
Reporting and resolving your tax-related identity
• Braille Ready File (BRF).
theft issues.
Disasters. Go to IRS.gov/DisasterRelief to review the • Tax-related identity theft happens when someone
available disaster tax relief. steals your personal information to commit tax fraud.
Your taxes can be affected if your SSN is used to file a
Getting tax forms and publications. Go to IRS.gov/ fraudulent return or to claim a refund or credit.
Forms to view, download, or print all the forms, instruc-
tions, and publications you may need. Or, you can go to • The IRS doesn’t initiate contact with taxpayers by
IRS.gov/OrderForms to place an order. email, text messages (including shortened links), tele-
phone calls, or social media channels to request or
Getting tax publications and instructions in eBook verify personal or financial information. This includes
format. Download and view most tax publications and in- requests for personal identification numbers (PINs),
structions (including the Instructions for Form 1040) on passwords, or similar information for credit cards,
mobile devices as eBooks at IRS.gov/eBooks. banks, or other financial accounts.
IRS eBooks have been tested using Apple's iBooks for
• Go to IRS.gov/IdentityTheft, the IRS Identity Theft
iPad. Our eBooks haven’t been tested on other dedicated Central webpage, for information on identity theft and
eBook readers, and eBook functionality may not operate data security protection for taxpayers, tax professio-
as intended. nals, and businesses. If your SSN has been lost or
Access your online account (individual taxpayers stolen or you suspect you’re a victim of tax-related
only). Go to IRS.gov/Account to securely access infor- identity theft, you can learn what steps you should
mation about your federal tax account. take.

• View the amount you owe and a breakdown by tax • Get an Identity Protection PIN (IP PIN). IP PINs are
year. six-digit numbers assigned to taxpayers to help pre-
vent the misuse of their SSNs on fraudulent federal in-
• See payment plan details or apply for a new payment come tax returns. When you have an IP PIN, it pre-
plan. vents someone else from filing a tax return with your
• Make a payment or view 5 years of payment history SSN. To learn more, go to IRS.gov/IPPIN.
and any pending or scheduled payments.

22 Publication 523 (2023)

Ways to check on the status of your refund. Checking the status of your amended return. Go to
IRS.gov/WMAR to track the status of Form 1040-X amen-
• Go to IRS.gov/Refunds.
ded returns.
• Download the official IRS2Go app to your mobile de-
It can take up to 3 weeks from the date you filed
vice to check your refund status.
! your amended return for it to show up in our sys-
• Call the automated refund hotline at 800-829-1954. CAUTION tem, and processing it can take up to 16 weeks.
The IRS can’t issue refunds before mid-February
! for returns that claimed the EIC or the additional Understanding an IRS notice or letter you’ve re-
CAUTION child tax credit (ACTC). This applies to the entire ceived. Go to IRS.gov/Notices to find additional informa-
refund, not just the portion associated with these credits. tion about responding to an IRS notice or letter.

Responding to an IRS notice or letter. You can now

Making a tax payment. Payments of U.S. tax must be
upload responses to all notices and letters using the
remitted to the IRS in U.S. dollars. Digital assets are not
Document Upload Tool. For notices that require additional
accepted. Go to IRS.gov/Payments for information on how
action, taxpayers will be redirected appropriately on
to make a payment using any of the following options.
IRS.gov to take further action. To learn more about the
• IRS Direct Pay: Pay your individual tax bill or estimated tool, go to IRS.gov/Upload.
tax payment directly from your checking or savings ac-
count at no cost to you. Note. You can use Schedule LEP (Form 1040), Re-
quest for Change in Language Preference, to state a pref-
• Debit Card, Credit Card, or Digital Wallet: Choose an erence to receive notices, letters, or other written commu-
approved payment processor to pay online or by nications from the IRS in an alternative language. You may
phone. not immediately receive written communications in the re-
• Electronic Funds Withdrawal: Schedule a payment quested language. The IRS’s commitment to LEP taxpay-
when filing your federal taxes using tax return prepara- ers is part of a multi-year timeline that began providing
tion software or through a tax professional. translations in 2023. You will continue to receive communi-
cations, including notices and letters, in English until they
• Electronic Federal Tax Payment System: Best option are translated to your preferred language.
for businesses. Enrollment is required.
• Check or Money Order: Mail your payment to the ad- Contacting your local TAC. Keep in mind, many ques-
dress listed on the notice or instructions. tions can be answered on IRS.gov without visiting a TAC.
Go to IRS.gov/LetUsHelp for the topics people ask about
• Cash: You may be able to pay your taxes with cash at most. If you still need help, TACs provide tax help when a
a participating retail store. tax issue can’t be handled online or by phone. All TACs
• Same-Day Wire: You may be able to do same-day now provide service by appointment, so you’ll know in ad-
wire from your financial institution. Contact your finan- vance that you can get the service you need without long
cial institution for availability, cost, and time frames. wait times. Before you visit, go to IRS.gov/TACLocator to
find the nearest TAC and to check hours, available serv-
Note. The IRS uses the latest encryption technology to ices, and appointment options. Or, on the IRS2Go app,
ensure that the electronic payments you make online, by under the Stay Connected tab, choose the Contact Us op-
phone, or from a mobile device using the IRS2Go app are tion and click on “Local Offices.”
safe and secure. Paying electronically is quick, easy, and
faster than mailing in a check or money order.
The Taxpayer Advocate Service (TAS)
What if I can’t pay now? Go to IRS.gov/Payments for Is Here To Help You
more information about your options.
What Is TAS?
• Apply for an online payment agreement (IRS.gov/
OPA) to meet your tax obligation in monthly install- TAS is an independent organization within the IRS that
ments if you can’t pay your taxes in full today. Once helps taxpayers and protects taxpayer rights. TAS strives
you complete the online process, you will receive im- to ensure that every taxpayer is treated fairly and that you
mediate notification of whether your agreement has know and understand your rights under the Taxpayer Bill
been approved. of Rights.
• Use the Offer in Compromise Pre-Qualifier to see if
you can settle your tax debt for less than the full How Can You Learn About Your Taxpayer
amount you owe. For more information on the Offer in Rights?
Compromise program, go to IRS.gov/OIC.
The Taxpayer Bill of Rights describes 10 basic rights that
Filing an amended return. Go to IRS.gov/Form1040X all taxpayers have when dealing with the IRS. Go to
for information and updates. TaxpayerAdvocate.IRS.gov to help you understand what
these rights mean to you and how they apply. These are
your rights. Know them. Use them.

Publication 523 (2023) 23

What Can TAS Do for You? • Check your local directory; or
TAS can help you resolve problems that you can’t resolve
• Call TAS toll free at 877-777-4778.
with the IRS. And their service is free. If you qualify for
their assistance, you will be assigned to one advocate How Else Does TAS Help Taxpayers?
who will work with you throughout the process and will do
TAS works to resolve large-scale problems that affect
everything possible to resolve your issue. TAS can help
many taxpayers. If you know of one of these broad issues,
you if:
report it to TAS at IRS.gov/SAMS. Be sure to not include
• Your problem is causing financial difficulty for you, any personal taxpayer information.
your family, or your business;
• You face (or your business is facing) an immediate Low Income Taxpayer Clinics (LITCs)
threat of adverse action; or
LITCs are independent from the IRS and TAS. LITCs rep-
• You’ve tried repeatedly to contact the IRS but no one resent individuals whose income is below a certain level
has responded, or the IRS hasn’t responded by the and who need to resolve tax problems with the IRS. LITCs
date promised. can represent taxpayers in audits, appeals, and tax collec-
tion disputes before the IRS and in court. In addition,
How Can You Reach TAS? LITCs can provide information about taxpayer rights and
responsibilities in different languages for individuals who
TAS has offices in every state, the District of Columbia,
speak English as a second language. Services are offered
and Puerto Rico. To find your advocate’s number:
for free or a small fee. For more information or to find an
• Go to TaxpayerAdvocate.IRS.gov/Contact-Us; LITC near you, go to the LITC page at
• Download Pub. 1546, The Taxpayer Advocate Service TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134,
Is Your Voice at the IRS, available at IRS.gov/pub/irs- Low Income Taxpayer Clinic List, at IRS.gov/pub/irs-pdf/
pdf/p1546.pdf; p4134.pdf.
• Call the IRS toll free at 800-TAX-FORM
(800-829-3676) to order a copy of Pub. 1546;

24 Publication 523 (2023)

 To help us develop a more useful index, please let us know if you have ideas for index entries.
Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Subsidies 10 More than one home 3

A exclusion of canceled or forgiven mortgage
debt 2 N
Armed Service Members 4 Exclusion of gain 3
Assistance (See Tax help) Nonresident or resident alien 19
Automatic disqualification 3
F
Away from home 4 O
Federal mortgage subsidies 20
First-time homebuyer tax credit 20 Ownership 3
B Ownership requirement 3
Form 8949 19
Basis adjustments: Future developments 1
Adjusted basis 8 P
Business or Rental use of home 12
G Paying back credits 20
Gain or loss 8 Paying back subsidies 20
C Peace Corps Members 4
Exclusion of gain 3
Capital Gains: Publications (See Tax help)
Qualified Opportunity Funds 2
H
Closing costs 9 R
Community property: Home acquired through a trade 10
Home inherited 11 Remodeling 10
Basis determination 11
Home received as gift 11 Rental use of home 16
Condemnation:
Home sale: Repairs 10
Basis 11
Reporting requirements 18 Reporting home sale deductions 19
Sale price 11
Houseboat: Reporting other income related to home
Condominium: sale 20
As main home 3 As main home 3
Reporting taxable gain or loss 18
Cooperative apartment: Residence 3
As main home 3 I Residence requirement 3
Improvements 9
D Inheritance: S
Death of Spouse 4 Home received as 11
Seller costs 9
Depreciation: Installment sale 19
Settlement fees 9
Home used for business or rental Interest reporting 19
Spouse:
purposes 17
Death of (See Surviving spouse)
Destruction: L Surviving spouse:
Basis 11
Look-back requirement 4 Basis determination 11
Sale price 11
Look-back requirement exceptions 4
Disability:
Mentally disabled 4
T
Physically disabled 4
M Tax help 20
Divorce 11 Main home: Taxable gain 16
Defined 3 Transfer of home 3
E Factors used to determine 3
Eligibility test 3
Missing children, photographs of 1 W
Mobile home:
Energy: Widowed Taxpayers 4
As main home 3
Credit 10

Publication 523 (2023) 25