If you have a gain on the sale of your home, you qualify to exclude the gain, and your gain does not exceed the maximum exclusion amount, you do not need to report the sale on your tax return.
If you do not qualify for the exclusion, your gain on the sale is taxable. Or, if your gain exceeds the maximum exclusion amount, the excess amount is taxable. You report any taxable gain on Schedule D, Capital Gains and Losses. You report the entire gain either in Part I of Schedule D as a short-term capital gain if you owned your home one year or less, or in Part II as a long-term capital gain if you owned it for over one year. If you qualify for an exclusion, you should write “Section 121 exclusion” directly below the line on which you report your gain, and show the exclusion amount in parentheses.
A loss on the sale of your main home cannot be deducted.