What Documents Do I Need for Taxes If I Sold a House?
Learn which documents you need to report the sale of a home on your taxes, including forms for income, deductions, and potential capital gains.
Selling a home comes with tax implications, and having the right documents is essential when filing your return. The IRS requires specific forms and records to determine whether you owe capital gains taxes or qualify for exclusions. Missing paperwork can lead to errors, delays, or even audits.
Gather documents related to the sale price, expenses, improvements, mortgage details, and property taxes to ensure accurate reporting.
Key IRS Forms
The IRS requires specific forms to report a home sale, with the most common being Form 1099-S, Proceeds from Real Estate Transactions. This document, typically issued by the closing agent, reports the gross proceeds from the sale. Some sellers may be exempt from receiving it—such as those who qualify for the Section 121 exclusion on capital gains—but many still need to report the transaction. If you don’t receive a 1099-S, confirm whether the sale meets the IRS criteria for exclusion.
To calculate taxable gain, use Form 8949, Sales and Other Dispositions of Capital Assets, which reports the sale price, adjusted basis, and any applicable adjustments. The totals from this form transfer to Schedule D (Form 1040), Capital Gains and Losses, which determines whether you owe taxes. If the gain exceeds the exclusion limits—$250,000 for single filers and $500,000 for married couples filing jointly—you may owe capital gains tax, ranging from 0% to 20% depending on income.
If a portion of your mortgage was canceled or forgiven, such as in a short sale or foreclosure, Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, may be required to determine whether the forgiven amount is taxable.
Settlement Documentation
The settlement statement, often called a Closing Disclosure or ALTA Settlement Statement, provides a breakdown of the sale’s financial aspects, including the final sale price, real estate commissions, title fees, and closing costs. These expenses affect taxable gain, as certain costs may be deductible or reduce the profit subject to capital gains tax.
Title and escrow fees, attorney charges, and transfer taxes impact net proceeds. State or local transfer taxes may be deductible as selling expenses. Prorated property taxes paid at closing should also be documented, as they can influence deductions.
If you covered part of the buyer’s closing costs, this should be noted, as seller concessions reduce the amount you effectively received. If the buyer assumed your mortgage instead of securing a new one, this financial arrangement should be recorded for accurate tax reporting.
Evidence of Improvements
Tracking home improvements is important because they increase your cost basis, reducing taxable gain. The IRS allows sellers to add the cost of qualifying improvements to their original purchase price. However, only improvements that add value to the home, extend its useful life, or adapt it to new uses qualify. Routine repairs, such as fixing a leaky faucet or repainting a room in the same color, do not.
Keep invoices, receipts, contracts, and bank statements showing the cost, date, and nature of the work. For example, if you installed a new roof, added a deck, or upgraded your HVAC system, contractor agreements and proof of payment ensure these expenses are properly accounted for. If improvements were financed through a home equity loan or line of credit, statements showing the disbursement of funds serve as supporting evidence.
If renovations spanned multiple years, maintain a running ledger of expenses to avoid missing deductions. Digital copies of documents are acceptable as long as they are legible. If improvements were part of a larger remodel, itemized invoices breaking down labor and materials separately can be useful in the event of an IRS inquiry.
Mortgage and Interest Statements
For sellers with an outstanding mortgage, Form 1098, Mortgage Interest Statement, details the total interest paid on the loan during the year. Even after selling, mortgage interest paid before the sale can be claimed as an itemized deduction on Schedule A (Form 1040), provided total itemized deductions exceed the standard deduction threshold.
The statement may also reflect points paid when the mortgage was originally obtained or refinanced. Points, which represent prepaid interest, can sometimes be deducted in full in the year they were paid or may need to be amortized over the loan’s life. If the mortgage was refinanced multiple times, records from prior Form 1098s help track any remaining unamortized points that could be deducted in the year of sale.
Property Taxes
Property tax records impact both deductions and capital gains calculations. Since property taxes are often paid in advance or arrears depending on the jurisdiction, sellers typically pay a prorated amount at closing, which should be documented. The IRS allows homeowners to deduct property taxes paid up until the date of sale if they itemize deductions on Schedule A (Form 1040).
If property taxes were escrowed by the mortgage lender, reviewing the annual escrow statement confirms the total amount paid throughout the year. Any outstanding property taxes settled at closing should be reflected on the settlement statement to ensure proper accounting. Some states offer property tax refunds or credits for homeowners who sell mid-year, so checking local tax laws can help determine if any adjustments apply.