January 21, 2026 —
You finally did it!
After years of thinking about downsizing and moving to a condominium, retirement community or apartment, you saw your dream come true in 2015. Now it’s time to think about the final chapter – calculating the tax benefits related to selling your main home.
First off, you may qualify for free tax preparation. AARP Foundation Tax-Aides are available at no charge to taxpayers with low and moderate income, with special attention to those 60 years and older. Sites across the United States are open from late January to April 15. You can also submit questions online.
The IRS provides a free publication outlining the tax rules related to selling your main home.
Must be Main Home
According to the IRS, you may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return, in most cases) on the sale of your main home. (If you sell your home at a loss, the money you receive is not taxable. However, you cannot deduct the loss from other income.)
Usually, your main home is the home you live in most of the time and can be a:
- House
- Houseboat
- Mobile home
- Cooperative apartment
- Condominium
To claim the exclusion, during the five-year period ending on the date of the sale, you must have:
- Owned the home for at least two years
- Lived in the home as your main home for at least two years
- During the two-year period ending on the date of the sale, you did not exclude gain from the sale of another home.
Generally, if you can exclude all of the gain, you do not need to report the sale on your tax return unless you receive a form 1099-S from your real estate broker.
Other Factors to Consider
If you own or live in more than one home, the test for determining which one is your main home is a “facts and circumstances” test. The most important factor is where you spend the most time. But other issues that may come into play is what address is listed on your voter registration, tax returns and driver’s license.
If you have a disability, and are physically or mentally unable to care for yourself, you only need to show that your home was your residence for at least 12 months out of the 5 years leading up to the date of sale. In addition, any time you spend living in a skilled nursing center counts toward your residence requirement, so long as the center has a license from a state or other political entity to care for people with your condition.
If your spouse died, you may still qualify to exclude up to $500,000 of any gain if you meet the following requirements:
- The sale took place no more than two years after the date of death of your spouse
- You have not remarried
- You and your late spouse met the use and ownership tests at the time of your spouse’s death
- Neither you nor your late spouse excluded gain from the sale of another home during the last two years.
If you operated a business out of your main home, if may affect your gain/loss calculation. For instance, if you used a spare bedroom or other physical living space as a home office, it will not affect the calculation. However, if the business was separate from your living space, such as a rental apartment with its own entrance, kitchen and bath, it will affect the calculation.
Written By: Molly Kavanaugh