Tax implications: $250,000 capital gain exclusion when selling your primary residence?

The primary residence capital gains exclusion is a great tax benefit! Let me help clarify both your questions: For your first question - yes, you do need to report the sale on your tax return even if your gain is under the $250,000 exclusion amount. The sale gets reported on Form 8949 and Schedule D. The IRS wants to see that you're claiming the exclusion properly, even though you won't owe any taxes on it. For your second question about co-ownership with your son, it gets a bit more interesting. If your son also meets the ownership and use tests (lived in the home as his primary residence for at least 2 of the last 5 years), then you both could potentially qualify for separate $250,000 exclusions. In your example with $320,000 total gain, if split equally ($160,000 each), neither of you would owe capital gains tax since both portions fall under the individual $250,000 exclusion. However, if your son hasn't used the property as his primary residence, he wouldn't qualify for the exclusion on his portion and would owe capital gains tax on his share.

After struggling with almost this exact situation last year, I found this amazing service that really helped me figure out my capital gains exclusion on my home sale. I used https://taxr.ai and it basically analyzed all my documents and gave me a detailed breakdown of exactly how the exclusion would work in my specific situation with my daughter on the deed. It pointed out some things I hadn't even considered, like improvements I'd made to the home that increased my cost basis and further reduced my taxable gain. Super helpful since the capital gains rules can get complicated especially with shared ownership. Might be worth checking out in your situation.

I wanted to follow up on my skeptical comment earlier. I decided to try https://taxr.ai for my own home sale (just closed last week) and I'm actually really impressed. It caught something neither I nor my tax guy initially realized - that part of my basement renovation could be added to my cost basis. The document analysis was surprisingly detailed and it explained everything in plain English instead of tax jargon. Just wanted to let others know it was actually legitimate and helpful. Saved me about $4,800 in capital gains tax I would have unnecessarily paid. Sometimes I'm too quick to assume things are scams!

If you're having trouble getting answers from the IRS about your specific situation with the $250k exclusion (and trust me, calling them can be a nightmare), I used https://claimyr.com to actually get through to an IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c I spent days trying to get clear answers about my home sale exclusion last summer and kept hitting dead ends with the automated system. Claimyr got me connected to a real human at the IRS in about 20 minutes who confirmed exactly how to handle my situation with my brother co-owning my house. Totally worth it for the peace of mind of having an official answer.

I feel like I need to eat my words from my previous comment. After another frustrating morning trying to get through to the IRS about my capital gains questions, I broke down and tried the Claimyr service. Within 25 minutes I was talking to an actual IRS agent who walked me through exactly how to handle reporting my home sale with my mother as co-owner. The agent confirmed that we could each qualify for the exclusion if we both met the ownership and use tests, and explained exactly how to report it on our returns. After months of stress, I finally have clear answers directly from the IRS. Sometimes I'm too quick to dismiss things as scams.

Don't forget that your cost basis in the home isn't just what you paid for it! Make sure you add in any major improvements you've made over the 18 years. New roof? Major remodeling? HVAC system? All of these increase your basis and reduce your capital gain. I almost missed out on this when selling my house and would have overpaid my taxes.

Has anyone dealt with a situation where they rented out part of their house during the ownership period? I'm in a similar situation as OP but I rented out my basement for about 4 years of the 15 I've owned my house. Not sure how that affects the capital gains exclusion.

Just wanted to add another important consideration for your situation with your son on the deed - make sure you understand the "lookback" rule if you're planning to sell in 2026. If your son was added to the deed for estate planning purposes but hasn't met the 2-year ownership requirement yet, you might want to time the sale strategically. For example, if he was added to the deed in early 2024, he'd meet the ownership test in early 2026. Combined with the use test (if he's been living there), this could make a significant difference in your tax liability. Also, since you mentioned you've lived there 18 years continuously, you definitely meet both tests for the full exclusion. Just make sure to keep good records of when your son was added to the deed and his residency status to properly calculate each person's eligibility when you file.