Home sale when file Married filing separately

Forum|Forum|4 years ago
April 5, 2022
1 reply
0 views

5 years ago my wife and I bought a house for $200K and lived in it, primary home and meet ownership test. In 2021 we sold the house for $600K. How do I handle the $400K gain?

1. If we file as Married filing separately, do I claim selling price as $300K ($600K/2) - expenses/2 in each file or

2. I must switch from MFS to Married filing Jointly to account for the total $400K gain in a single file

Is #1 a viable option ?

Best answer by AamilD

Yes you can still file as MFS. If filing as Married Filing Separately, you will divide everything equally including the exclusion. Total exclusion for each of you will be $250,000.

Since the total exclusion of gain is $500,000 and if you file as MFS then each of you can take $250,000 of exclusion.

So if you want to file as MFS, you can split everything 50/50 including the 1099-S which you would have received.

To include the 1099-S that you should have received from the sale of your home follow these steps:

Please follow the steps below to include your 1099-S on your tax return:

• Go to Federal Taxes

• Select Wages & Income

• Click I'll choose what I work on

• Scroll down toward the bottom and find the "Less Common Income" section

• Select Start next to Sale of Home

• Go through this section and include your 1099-S information.

AamilDAnswer

Yes you can still file as MFS. If filing as Married Filing Separately, you will divide everything equally including the exclusion. Total exclusion for each of you will be $250,000.

Since the total exclusion of gain is $500,000 and if you file as MFS then each of you can take $250,000 of exclusion.

So if you want to file as MFS, you can split everything 50/50 including the 1099-S which you would have received.

To include the 1099-S that you should have received from the sale of your home follow these steps:

Please follow the steps below to include your 1099-S on your tax return:

• Go to Federal Taxes

• Select Wages & Income

• Click I'll choose what I work on

• Scroll down toward the bottom and find the "Less Common Income" section

• Select Start next to Sale of Home

• Go through this section and include your 1099-S information.

dimitrimAuthor

@AamilD Thanks for the quick reply.

So with MFS and each of us taking the $250,000 exclusion, if the gain is less that $250,000 I don't have to record the home sale since I did not receive a 1099-S?

JohnB5677

That's correct, you do not have to report the sale. Here is the IRS guideline. Topic No. 701 Sale of Your Home Under Reporting the Sale

If you receive an informational income-reporting document such as Form 1099-S, Proceeds From Real Estate Transactions, you must report the sale of the home even if the gain from the sale is excludable.

Additionally, you must report the sale of the home if you can't exclude all of your capital gain from income. Use Schedule D (Form 1040), Capital Gains and Losses and Form 8949, Sales and Other Dispositions of Capital Assets when required to report the home sale. Refer to Publication 523 for the rules on reporting your sale on your income tax return.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"