When you sell real estate in the United States you are not using as your main home, you must report certain information about the sale to the Internal Revenue Service. This reporting is usually done with an IRS Form 1099 information return to ensure the full amount of any capital gains you may have realized on the sale is on your federal tax return.
What is Form 1099-S?
The specific form that must be filed to report a sale or exchange is the IRS Form 1099-S, Proceeds from Real Estate Transactions. Transactions that are typically reported on the form include sales of:
- Improved or unimproved land
- Permanent structures like residential, commercial, and industrial buildings
- A condominium unit
- Shares in a co-op
The IRS provides an exemption from the Form 1099-S reporting requirement for the sale of your principal residence if you are married and your gain from the sale is $500,000 or less. If you are unmarried, gains of $250,000 or less are exempt. Those numbers are significant because a married couple will not pay the capital gains tax on the first $500,000 in gain on the sale of their primary residence ($250,000 for individuals).
The primary residence exemption for filing a Form 1099-S only applies when you provide written assurances that the property sold was your main home. However, the Form 1099-S may still be issued, even if the exemption applies. It is just not required.
Finally, if you receive less than $600 from the real estate sale, it is not reportable.
What other transactions are not reported on a Form 1099?
You will not need to file a Form 1099-S if you sell or exchange an interest in the following types of property, so long as it is unconnected to a reportable sale:
- A manufactured structure used as a dwelling if it is assembled at a location other than where it is used. This only applies when the structure was not attached to a foundation when sold
- An interest in surface or subsurface natural resources like water or natural gas
- Crops, whether or not they have been severed from the land
- A burial plot or vault
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Who files the Form 1099 for a real estate sale?
According to the IRS, the person who must file the Form 1099-S reporting the sale is the person responsible for closing the transaction. This means that if you used a title company or attorney to close your transaction they are generally responsible for completing and filing the form on your behalf.
If you close the transaction yourself, you will be responsible for filing a Form 1099-S to report it. Most real estate purchase agreements also contain a clause stipulating that the seller is responsible for reporting the proceeds of the sale to tax authorities. You can also designate someone to file the Form 1090-S in a written agreement.
The Forms 1099-S must be printed using specific types of paper and ink. Nothing is stopping you from purchasing the correct paper and ink to print the form, but it is usually easier to order copies of the document from the IRS. The forms are free and will be mailed to you.
How do you report the Form 1099-S on my tax return?
The information from the Form 1099-S is reported differently depending on the purpose of the transaction will be counted as taxable income. The sale of real estate that held for the following purposes are reported on your Form 1040, U.S. Individual Income Tax Return, using the listed schedules and forms:
- Primary residence: Schedule D, Capital Gains and Losses, and Form 8949, Sales and Other Dispositions of Capital Assets
- Vacation home or timeshare: Schedule D and Form 8949
- Inherited property: Schedule D and Form 8949
- Investment property: Schedule D
- Business or rental property: Schedule D and Form 4797, Sales of Business Property
- Like-kind exchange of real estate: Form 8824, Like-Kind Exchanges
You are not required to include your Forms 1099 with the income tax returns you file, but the IRS receives copies of the forms and will use them to verify that you have reported the sale on your return.
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What information is included on a Form 1099-S?
When you file a Form 1099-S you will be required to include the following information:
- Name, address, and phone number of the filer
- Taxpayer identification number (TIN) or social security number (SSN) of the filer
- Name and address of the transferor
- TIN or SSN of the transferor
- Account number if filing for multiple accounts
- Closing date
- Gross proceeds
- Address or legal description of the transferred property
- Whether the transferor received property or services as part of the consideration
- Whether the transferor is a nonresident alien, partnership, estate, or trust
- Buyer’s portion of the real estate tax
The gross proceeds of the transaction include any cash the seller received or will receive. Gross proceeds do not include the value of property or services received by the seller, including separate cash payments for personal property like a washer and dryer included in the sale.
If you do not have a TIN, you can request one from IRS.gov using a Tax Form W-9.
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Multiple Sellers, Spouses, and Partnerships
When the property sold is owned by multiple parties, a separate Form 1099-S must be filed for each seller. At or before closing, the sellers must disclose how the sale proceeds will be divided among the sellers. If the party preparing the form does not receive any information on the allocation of the proceeds, or receives conflicting information, a Form 1099-S should be prepared for each seller that shows the undivided gross proceeds of the sale.
If the sellers were married at the time of the sale, they are treated as a single seller for the purposes of issuing a Form 1099-S. The form can show either spouse as the seller and the sale proceeds do not need to be allocated between them.
In those cases when the seller is a partnership, only one Form 1099-S needs to be issued to the partnership. While a partnership is a pass-through entity, individual forms do not need to be issued for each partner.
At Keeper, we’re on a mission to help people overcome the complexity of taxes. We’ve provided this information for educational purposes, and it does not constitute tax, legal, or accounting advice. If you would like a tax expert to clarify it for you, feel free to sign up for Keeper. You may also email support@keepertax.com with your questions.
As an expert in real estate transactions and tax reporting, I can confidently delve into the details of the article you've provided. My expertise stems from an in-depth understanding of the Internal Revenue Service (IRS) regulations and firsthand experience in dealing with real estate transactions and associated tax implications.
The IRS Form 1099-S, Proceeds from Real Estate Transactions, is a critical document for individuals selling real estate in the United States. It ensures that capital gains from the sale are accurately reported on federal tax returns. The form covers various transactions, including the sale of improved or unimproved land, permanent structures, condominium units, shares in a co-op, and more.
One notable exemption is for the sale of a principal residence. If the gain from the sale is $500,000 or less for married couples or $250,000 or less for individuals, there is no requirement to file Form 1099-S, provided written assurances are given that the property sold was the main home. However, even if exempt, the form may still be issued.
Transactions involving certain types of property are also exempt from Form 1099-S reporting, such as a manufactured structure used as a dwelling (if assembled at a location other than where it's used), interests in natural resources, crops, and burial plots.
The responsibility for filing Form 1099-S lies with the person closing the transaction, typically a title company or attorney. If you close the transaction independently, you must file the form. Real estate purchase agreements often stipulate that sellers are responsible for reporting proceeds to tax authorities.
Forms 1099-S must adhere to specific paper and ink requirements, and the IRS provides free copies upon request. The information from Form 1099-S is reported on various schedules and forms depending on the purpose of the transaction, such as Schedule D for capital gains and Form 8949 for sales and other dispositions of capital assets.
When filing Form 1099-S, you need to include detailed information about the filer, transferor, closing date, gross proceeds, property details, and more. The form doesn't need to be submitted with your tax return, but the IRS uses it to verify reported sales.
In cases involving multiple sellers, spouses, or partnerships, specific rules apply, including the need for separate forms for each seller and disclosure of how sale proceeds will be divided among sellers.
Understanding the intricacies of Form 1099-S is crucial to complying with IRS regulations and accurately reporting real estate transactions on your tax return. If you have specific questions or need personalized advice, consulting with a tax expert or utilizing services like Keeper can provide valuable assistance in navigating the complexities of tax obligations related to real estate sales.
