Selling a home is a whirlwind of paperwork. Most people assume the IRS gets a copy of everything. However, many real estate deals are actually exempt from Form 1099-S.
Knowing these exemptions saves time for sellers. It also keeps tax software users from filing unnecessary forms. Here is exactly who can skip the 1099-S this year.
The Primary Residence Rule
The most common exemption applies to your own home. If you sell your main house, you might not need a form.
- Individuals: Sales capital gains under $250,000 are exempt.
- Married Couples: Sales capital gains under $500,000 are exempt.
- The 2-of-5 Rule: You must have lived there for two of the last five years.
Statistically, over 90% of residential sales fall under these limits. You must sign a Certification of Exemption at closing to prove this.
Corporations and Government Entities
The IRS does not need to track every big business deal. Therefore, certain “Transferors” are automatically exempt.
Which Entities Skip the Form?
- Corporations: Any business registered as a corp is exempt.
- Government Units: Federal, state, or local agencies do not receive 1099-S forms.
- Exempt Volume Transferors: This applies to sellers doing 25 or more deals per year.
To qualify as a volume transferor, you must file a specific certificate with the IRS. This tells them you are a professional and will report income elsewhere.
New 2026 Rules: Digital Assets and Crypto
The 2026 tax year introduced a major shift. Many people now buy real estate using Bitcoin or Stable coins.
You might think digital deals are “off the grid.” That is a dangerous mistake. If you use crypto, the closing agent must report the Fair Market Value in dollars. The IRS treats digital assets as property, not cash. So, even if the sale qualifies for an exemption, proper documentation is still required.
Surprising Items That Are Always Exempt
Not every transfer of “rights” counts as a real estate sale. The IRS has a very specific list of what they do not care about.
- Burial Plots: Selling a cemetery lot is not a reportable sale.
- Mobile Homes: If it has no permanent foundation, it is personal property.
- Small Land Rights: Selling water or mineral rights is often exempt. However, exemption status can vary depending on the structure.
- Foreclosures: These use Form 1099-A instead of 1099-S.
Expert Note: There is no minimum dollar amount for land. Even a $10 sale of a backyard strip is reportable if no other exemption fits.
How to Handle the Filing Process
If you are using filing software, the “Exempt” flag is your best friend.
First, verify the Taxpayer Identification Number. Next, ensure the Certification of Exemption was actually signed. If those two boxes are checked, you can safely skip the 1099-S.
Moving forward, the new IRIS system will flag errors faster than ever. Precision is your best defense against an IRS letter.
Final Thoughts:
If you are concerned about the highly tiring filing process, use E-File Workforce Payroll. The software has an intuitive design and is best for filing business and individual forms, including Form 941, 1099 NEC and more.
