Question:   I sold my principal residence this year. What form do I need to file?

Answer:   For home sales after May 6, 1997, you will generally only need to report the sale of your home if you realized a gain on the sale and either you did not own and use the home as your principal residence for a total of at least two years during the five year period that ended on the date of the sale or you realized a gain of more than $250,000 ($500,000 for certain joint returns). To determine the amount of gain that can be excluded from income refer to Publication 523, Selling Your Home.

You may be entitled to exclude the gain realized on sale of your principal residence from income if during the 5-year period ending on the date of the sale:

• You owned the home for a total of at least 2 years; the 2 year period need not be continuous (the ownership test).
• You must have lived in the home as your main home for a total of at least 2 years; the 2 year period need not be continuous (the use test).
• During the 2-year period ending on the date of sale, you did not exclude gain from the sale of another home.
• If you owned and lived in the property as your main home for less than 2 years, you may still be able to claim a reduced exclusion in some cases. See Publication 523, Selling Your Home for more information.

If you are required or choose to report a gain on the sale of your principal residence, it is reported on Form 1040, Schedule D  (PDF), Capital Gains and Losses.

NOTE:  If you were on qualified extended duty in the U.S. Armed Services, Foreign Service, or the intelligence community (sales or exchanges after December 20, 2006) you may suspend the five-year test period for up to 10 years. You may use this provision for only one property at a time. You are on qualified extended duty when you are assigned to a duty station at least 50 miles from your former principal residence or are residing in government housing under orders and the duty lasts for more than 90 days or for an indefinite period.