Tax Reporting on Real Estate Transactions

Title companies are responsible for reporting the sale of real estate transactions to the IRS. The form used is a 1099-S and is signed by the Seller at closing.

The 1099-S form notifies the IRS of the sale and states the seller’s gross proceeds.

A taxpayer is allowed to exclude from gain up to $250,000.00 ($500,000 for some married taxpayers filing jointly) on the sale of a taxpayer’s principal residence, provided that, the property has been owned and used as the taxpayer’s principal residence for a certain period of time (at least two of the last five years before sale of the property).

In exchange for the 1099-S form, a Seller may be asked to sign a “Certification for No Information Reporting on the Sale of Exchange of Principal Residence.” This form completed and signed by the Seller is used to determine whether a sale of real property must be reported to the IRS. If the Seller answers “yes” to certain assurances, no information reporting is required.

These assurances include:

  • The Seller owned and used the residence as their principal residence for a period of two or more years during the five-year period prior to the sale of the property
  • The Seller has not sold another principal residence within the last two years
  • No portion of the residence has been used for business or rental purposes, and
  • That the sale of the residence is $250,000 or less OR $500,000 or less for married couples filing jointly (conditioned on the first three assurances)

If you sold property, it is recommended to consult a Certified Public Accountant to discuss the tax implications of that sale and whether you are able to exclude the gain from your sale.