Do I need to report my home sale when capital gain is below exemption?

Does it matter if they owned the house for 6 years? I thought there was some 2-year rule or something?

Yes, the 6-year ownership period definitely satisfies the requirements. The rule is that you need to have owned and used the home as your main residence for at least 2 out of the 5 years before the sale to qualify for the exclusion. Since they owned and lived in it for 6 years, they easily meet the ownership and use tests for the capital gains exclusion. This is why they qualify for the full $500,000 exclusion as a married couple filing jointly.

How accurate is this tool? I'm selling my place next month and worried about messing up the tax part. Does it tell you how to deal with home improvements too? I've heard those adjust your cost basis.

Sounds like another tax software trying to make money off simple filing. Can't you just use TurboTax or H&R Block for this? Why would someone need a special tool?

It's been completely accurate for me - it even caught a mistake my realtor made on the settlement statement that would have affected my basis calculation. The tool specifically asks about home improvements and helps you document them as adjustments to your cost basis. It walks you through what receipts you should keep and how to factor them in. As for comparing to other tax software, the regular programs just give you empty forms to fill out. This actually analyzed my specific situation and explained what I needed to do and why. It's more like having a tax pro look at your documents but way more affordable. I still used my regular tax software for filing, just with much more confidence.

How does that even work? I thought the IRS phone system was just permanently broken. Do they have some special way to skip the line or something?

This sounds like a scam. Why would anyone pay to call a government agency? You can just keep calling the IRS yourself until you get through. And why would they have any special access that regular people don't?

It's actually pretty straightforward - they use an automated system that keeps dialing and navigating the IRS phone tree until it gets through, then it calls you when an agent is on the line. It's the same queue as everyone else, they just have technology doing the waiting instead of you having to sit on hold for hours. I was skeptical at first too, but after wasting nearly two weeks trying to get through myself, it was worth it to me. They don't have "special access" - they just handle the frustrating part of getting through the system. And honestly, the peace of mind from getting definitive answers from an actual IRS agent about my home sale reporting was worth every penny.

Thanks for pointing this out! We actually did a bathroom remodel (~$22k) and replaced all the windows (~$15k) a few years ago. I have receipts for everything. Do these improvements get listed somewhere specific on the tax forms?

You'll add those improvement costs to your original purchase price when calculating your adjusted basis on Form 8949. So if you bought the house for $200k and did $37k in improvements, your adjusted basis would be $237k. The difference between your selling price (minus selling expenses) and this adjusted basis is your actual gain for tax purposes. This means your real gain is likely even lower than you initially calculated, putting you even further below the $500k exclusion threshold. Still need to report it though!

You'll list it on Form 8949 first (Part II for long-term holdings) with code "H" in column (f), then the excluded amount as a negative number in column (g). Then the totals flow to Schedule D, Line 8. If you're using software like TurboTax or H&R Block, they should walk you through this if you tell them you sold your primary residence.