Reporting Gains on Sales

Historically, the IRS had required all homeowners to complete and file IRS Form 2119, Sale of Your Home, in the year that they sell a home. Form 2119 is no longer required for 1998 and thereafter.

Instead, those who owe some tax on the sale of a principal residence will report the sale as short-term or long-term gain on Schedule D, Capital Gains and Losses. If you owned the home for up to one year, any non-exempt gain would be considered short-term gain taxable at ordinary rates, and if you owned the home for more than one year, it would be taxed at the long-term rate, which is a maximum of 20 percent, or 10 percent for taxpayers in the 15 percent bracket. If you own your home for five years or more, the 20 and 10 percent rates are reduced to 18 and 8 percent, respectively.