Reporting the Sale of Real Estate Property

If you sell your home, you may not have to pay capital gains taxes, however, income from the sale of any other real estate or business property is fully taxable.


This page:

  • Explains what type of real estate sale is taxable

  • Describes how to report the sale of depreciated property

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Reporting the sale of real estate in Schedule D

The profits from selling real estate are fully taxable as capital gain, unless the property sold qualifies as your primary residence.

In addition, the profits from selling your house are recorded on Schedule D if they exceed the maximum allowed capital gain for a primary residence.

This means that generally, the sale of your primary residence is not considered a capital gain, unless you make enough money on the sale to surpass the IRS "profit threshold".

If the sale of your house makes a profit that exceeds $250,000 for unmarried taxpayers or $500,000 for married taxpayers, then you must claim a portion of the profit as a capital gain.

Your profit is figured by taking the amount you sold the house for and reducing it by the cost of the sale and the cost of the house. These costs can include:

  • real estate commission
  • title closing costs
  • advertising costs
  • attorney fees
  • the original amount you paid for your house
  • closing costs & attorney fees at the time of your purchase
  • cost of any improvements you made to your house

If this amount, your profit, is over the maximum excludable amount you must claim capital gains.

To claim the excess profit on your Schedule D, subtract either $250,000 or $500,000 (whichever corresponds to your filing status) from your profit and enter this number along with the date of purchase and sale and description on Schedule D in the appropriate long-terms capital gains section.

Unfortunately, if you sold your house at a loss, you are not entitled to a deduction. You might, however, be able to deduct interest points that you paid in the past but did not claim.

Reporting the sale of depreciated business property

The sale of business property, which is also part of your Schedule D, is more complicated and requires an additional form, Form 4797.

If, in previous years, you claimed depreciation on any of your sold business property, you must also make adjustments reflecting this.

This means that if you bought a computer for $2000, and subsequently claimed a deduction for $500 of depreciation, and then sold the computer for $1500, your new cost basis would be $1500, as you have already received a break on the $500 that the computer depreciated by.

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Related IRS publications

You can get more information about capital gains taxes directly from the IRS, in the form of IRS Publication 550.

If you file a paper return, you will also have to fill out Schedule D and possibly Schedule D-1. If you file electronically, all this will be taken care of for you electronically.

Note: you will need an Adobe Acrobat Reader to view these publications, which you can get here. (But you probably already have it.)