Home Sale Tax Glossary

Amount realized

Selling price minus selling expenses. Starting point for gain or loss on Publication 523 Worksheet-style math.

Adjusted basis

Your running tax cost in the home: generally purchase price plus capital improvements and certain closing costs, minus depreciation and other decreases (Publications 523 and 551).

Section 121 exclusion

Federal provision allowing exclusion of gain on a main home up to $250,000 or $500,000 (joint path) when ownership, use and other tests are met.

Ownership test

Generally, ownership of the home for at least 24 months during the five-year period ending on the sale date.

Use test

Generally, use of the home as your main home for at least 24 months during the same five-year look-back.

Main home

The dwelling that is your primary residence, considering facts such as time spent, work location and address used for daily life.

Partial exclusion

A reduced maximum exclusion available in some cases when full tests are unmet or a recent exclusion was claimed, if a qualifying reason applies under Publication 523.

Qualifying months

Months (capped at 24) used in the partial-exclusion fraction’s numerator.

Depreciation after May 6, 1997

Depreciation allowed or allowable after that date for periods after that date; not eligible for the Section 121 exclusion.

Nonqualified use

Periods that can cause a portion of gain to be ineligible for exclusion under Publication 523’s nonqualified-use rules.

Selling expenses

Costs of the sale that reduce amount realized, such as commissions and certain advertising or legal fees described in Publication 523.

Form 1099-S

Information return reporting real-estate sale proceeds to the taxpayer and IRS; not a computation of taxable gain.

Form 8949 / Schedule D

Federal forms used to report capital gains and losses, including many home sales when required by the instructions.

Seller net sheet

Informal estimate of cash to the seller after payoffs, commission and closing charges — not a Closing Disclosure.

Closing Disclosure

Settlement statement showing final credits and debits; authoritative for what was paid at closing.

See also the Section 121 guide and reporting guide.