DEFINITION of 'IRS Publication 523'

A document published by the Internal Revenue Service (IRS) that outlines the tax rules applying to the sale of a home. For this document, "home" specifically relates to a principal residence where the taxpayer lives most of the time. Taxpayers may be eligible to exclude all or part of the gain from the sale of a principal residence from income.

BREAKING DOWN 'IRS Publication 523'

In order to exclude gains the homeowner must meet both an ownership test and a use test. The ownership test requires that an individual has owned the home for at least two of the last five years; the use test requires that an individual has lived in the home as a primary residence for two of the past five years.


Gains that cannot be excluded are taxable; losses on the sale of a home cannot be deducted.


Because taxes related to homeownership are a politically sensitive subject, taxpayers should pay close attention to IRS Publication 523 because it may change more frequently than other IRS publications.


Members of the armed forces, the disabled and persons displaced due to home destruction or condemnation may be excepted from ownership and use rules.

RELATED TERMS
  1. Main Home

    A term used by the Internal Revenue Service (IRS) to define the ...
  2. Principal Private Residence (Canada)

    The home in which a Canadian taxpayer or family maintains its ...
  3. IRS Publication 1

    A document published by the Internal Revenue Service that identifies ...
  4. Home Office

    An office located inside the taxpayer's home that serves as the ...
  5. IRS Publication 594

    A document published by the Internal Revenue Service (IRS) that ...
  6. IRS Publication 544

    A document published by the Internal Revenue Service (IRS) that ...
Related Articles
  1. Taxes

    Is It True That You Can Sell Your Home And Not Pay Capital Gains Tax?

    Based on the Taxpayer Relief Act of 1997, if you are single, the first $250,000 you make on your home sale is not subject to capital gains tax.
  2. Taxes

    Will Your Home Sale Leave You With Tax Shock?

    Learn how the newest tax laws apply to the proceeds you earn.
  3. Taxes

    Tax Breaks for Second-Home Owners

    Owning a second home is a great investment for a variety of reasons, but you need to know the tax implications of multi-home ownership.
  4. Taxes

    A Tax Primer For Homeowners

    Go beyond interest and find out how mortgage points affect your taxable income.
  5. Financial Advisor

    IRS Allows Mortgage Deduction for Unwed Couples

    Single taxpayers who co-own one or more of their homes with another person can now each claim a deduction for the mortgage interest.
  6. Investing

    How To Afford A Second Home

    Saving enough to buy a vacation home involves some unique considerations including a big down payment and more lending hurdles.
  7. Taxes

    New Tax Rules Target The Top Tax Bracket

    The American Taxpayer Relief Act brings about new tax rules for the wealthy that people such as Warren Buffett have been calling for over the last few years.
  8. Taxes

    IRS Asset Seizures: Could It Happen To You?

    If you can't pay your taxes, know that the IRS has many avenues for collecting what you owe.
  9. Taxes

    Tax Rules For Resident And Nonresident Aliens

    This article examines the definition and tax treatment of these types of non-U.S. citizens.
  10. Investing

    Canada: A New Frontier For Real Estate Investors

    This property market is easy to access and provides profitable opportunities.
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center