It is not the money you receive for the sale of your home, but the amount of gain on the sale over your cost, or basis, that determines whether you will have to include any proceeds as taxable income on your return. You may be able to exclude this gain from income up to a maximum dollar limit. If you can exclude all of the gain, you do not need to report the sale on your tax return. To determine the maximum dollar limit you can exclude or for additional information on selling your home, refer to Publication 523, Selling Your Home.

References:

• Publication 523, Selling Your Home
• Tax Topic 701, Sale of your Home - after May 6, 1997
• Tax Topic 703, Basis of Assets

Source: www.irs.gov