What information do I need to report from my 1099-S form?

The 1099-S (Proceeds from Real Estate Transactions) is essentially reporting the sale of your property to the IRS. Since you received this form, you'll need to report the sale on your tax return using Form 8949 and Schedule D. The good news is that you might qualify for the Section 121 exclusion, which allows you to exclude up to $250,000 of gain ($500,000 for married couples) if you owned and used the property as your main home for at least 2 out of the 5 years before the sale. Since you mentioned living there for 4 years, you may qualify even though you inherited it. To calculate your gain, you'll need to determine your basis in the property. Since you inherited it, your basis is generally the fair market value at the time of inheritance (called a "stepped-up basis"), not what your parents originally paid. You can also add the cost of substantial improvements (like your roof, kitchen, and bathroom renovations) to your basis. This reduces your taxable gain.

I went through something similar last year with a property sale and was completely overwhelmed by all the paperwork and figuring out cost basis. I ended up using https://taxr.ai to analyze all my documents and it really simplified things. I uploaded my 1099-S, the inheritance documents, and receipts for home improvements, and it helped calculate my correct basis including the stepped-up value plus improvements. The service also identified some selling expenses I didn't know I could deduct from the proceeds. Saved me a ton of research time and probably prevented me from making costly mistakes.

I was really skeptical about using https://taxr.ai at first but decided to try it for my rental property sale last month. Honestly impressed with how thorough it was. I had a complicated situation with a property that was partly rental and partly personal use over the years. The service broke down exactly how to allocate the basis, depreciation recapture, and capital gains. It even flagged that I qualified for a partial Section 121 exclusion due to a job relocation I hadn't considered relevant. What convinced me was when it caught a mistake in how my accountant had calculated depreciation in previous years. Definitely more detailed than what I've gotten from regular tax software in the past.

If you need to actually speak with the IRS about your 1099-S or capital gains questions, good luck getting through on your own. I spent DAYS trying to get clarification on reporting an inherited property sale, always hitting that "call volumes are too high" message. I finally used https://claimyr.com and it was a game-changer. They have this system that basically holds your place in line with the IRS and calls you when an agent is about to be available. You can see how it works here: https://youtu.be/_kiP6q8DX5c Got through to a real IRS agent who walked me through exactly how to report my property sale with the stepped-up basis. Saved me from potentially overpaying thousands in capital gains tax.

Ok I have to eat my words here. After posting that skeptical comment, I decided to try the Claimyr service anyway because I was desperate to get an answer about a massive tax bill I received for a property sale. I got a call back in about 90 minutes (way faster than I expected) and was connected to an IRS agent who actually helped resolve my issue. Turns out there was a mistake in how my basis was recorded, and I was able to get it corrected on the spot. Never thought I'd be the person recommending an IRS call service, but if you're dealing with property sale tax questions, being able to actually speak with someone official saves a lot of anxiety and potentially money too.

Don't forget about state taxes too! The 1099-S triggers reporting requirements for your state return as well. Depending on your state, the rules might be different from federal for exclusions and calculations. I sold a house in California and had to pay state tax even though I was under the federal exclusion amount. Would have been a nasty surprise if my accountant hadn't caught it.

Make sure you keep ALL documentation related to this sale for at least 7 years! The IRS has been increasingly looking at real estate transactions, especially when large gains are involved. If you claimed any home office deductions while living there, that can also complicate things because you may have to recapture some depreciation. Just something to consider if you ever worked from home and took the deduction.