Question:   If I sell my home and use the money I receive to pay off the mortgage, do I have to pay taxes on that money?

Answer:   The amount realized on the sale in excess of your cost (adjusted basis), determines whether:

• You will have to include any gain realized on the sale as taxable income on your return. If you financed the purchase of the house by obtaining a mortgage, the mortgage proceeds would have been included in determining your cost basis in your residence. 
• Subject to specified limitations, you may be able to exclude the gain from income. If you can exclude all of the gain, you do not need to report the sale on your tax return. To determine the limitation on the amount of the gain you can exclude from income or for additional information on selling your home, refer to Publication 523, Selling Your Home.