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What Can I Write Off for Selling My House?

Moving is often costly, so it pays to investigate all possible tax breaks when selling your home. Depending on your circumstances, some of your profits may be exempt from taxation and you may even be able to deduct your moving costs. If you had to sell your home at a loss, the law may shield you from having to pay income tax on any debt forgiven by your lender.

  1. Exempt Gain

    • As of 2011, if you sell your home at a profit and meet other requirements, up to $250,000 of your gain from selling your home is tax exempt; married couples can deduct up to $500,000 from their gain. To qualify for this exemption, you must be able to prove that you owned and lived in your home for two years. In addition, you can only qualify for this exemption once in a two-year period. If your spouse or co-owner claims this exemption, he must likewise be able to prove that he lived in and owned the home for two years. If you or you co-owner cannot meet these requirements, either one of you may still be able to claim a reduced exemption if you can prove that a job change, health problems or unforeseen circumstances forced you to sell.

    Sale Expenses

    • The costs of selling your home, such as paying a commission to a real estate agent, placing ads in newspapers and legal fees, are deductible from your gain. This can reduce any taxes you would have to pay if your gain exceeds the exemption amount. You will need to provide proof of specific sale expenses with receipts and other documents.

    Short Sale

    • If you take a loss on the sale of your home, you cannot deduct this amount from your taxes. In fact, if you still owe money on your mortgage, your lender could still insist that you pay off your balance. However, some lenders may be willing to forgive this balance in cases where it is obvious that you don't have the means to repay it. While forgiven debt is subject to income tax, the The Mortgage Debt Relief Act of 2007 exempts $1 million of forgiven debt from taxation if you file your taxes individually; if you are married and file jointly, the exemption increases to $2 million. This provision currently is in effect through 2012.

    Moving Costs

    • If you sell your home so that you can take a new job 50 miles from your home, you can deduct moving costs from your taxes. These expenses include the cost of paying movers, travel and storage of your possessions. Meals are not deductible, however, and if your employer reimburses your moving costs, you may have to report the reimbursement as taxable income.

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