Code EH on Form 8949: Entry Rules and Home Sale Example

Code EH on Form 8949 is not a single code but a pair: you enter the letters “E” and “H” together in column (f) when one transaction needs two adjustments at once. Code E covers selling expenses or option premiums that weren’t reflected on your 1099-B, 1099-DA, or 1099-S. Code H covers the gain you’re excluding under the Section 121 home sale exclusion. The combination shows up almost exclusively on a primary-residence sale where closing costs reduced your net proceeds and you also qualify to exclude the gain.¹

What Each Letter Does

Column (f) exists to explain an adjustment. Whenever the gain or loss as computed from proceeds minus basis needs to change, you put a letter code in column (f) and the dollar effect in column (g). For a straightforward sale with correct 1099 information and no special treatment, both columns stay blank.¹

Code E applies to selling expenses the information return didn’t capture. On a home sale that usually means the real estate commission, title fees, transfer taxes, and other closing costs that reduced what you actually received. Because those costs cut your true gain, the Code E adjustment is entered as a negative number in column (g).¹

Code H signals that you sold your main home at a gain and are excluding part or all of it. If you owned and used the home as your primary residence for at least two of the five years before the sale, the exclusion is up to $250,000 for a single filer and up to $500,000 on a joint return. You report the sale as if no exclusion applied, then enter the excluded gain as a negative number in column (g).¹

How To Enter Two Codes On One Line

When more than one adjustment hits the same transaction, you list every applicable code together in column (f), alphabetically, with no spaces or commas. “EH” is the correct form; “E,H” or “E H” is not. Column (g) then carries the net of all the adjustments as a single number. The IRS instructions illustrate the same mechanic with the three-letter example “BOQ.”¹

Home sales held more than a year go on Part II of Form 8949 as long-term transactions.

A Worked Example With Full Exclusion

Suppose you sold your primary residence of twelve years for $450,000. Your original purchase price plus capital improvements comes to $200,000. You paid $27,000 in commissions and closing costs that aren’t reflected on your 1099-S. You file as single and meet the ownership and use tests.

Column (a), description: Primary Residence, 123 Main St.
Column (b), date acquired: your original purchase date.
Column (c), date sold: the closing date.
Column (d), proceeds: $450,000 from the 1099-S.
Column (e), cost basis: $200,000.
Column (f), code: EH.
Column (g), adjustment: ($250,000). This is the $27,000 of selling expenses plus the $223,000 excludable gain, which is the actual gain of $450,000 minus $200,000 minus $27,000. Because that figure sits under the $250,000 single-filer cap, all of it is excluded.
Column (h), gain or loss: zero, since $450,000 minus $200,000 minus the $250,000 adjustment leaves nothing.²

When The Gain Exceeds The Exclusion

The math shifts when actual gain runs past the cap. Take the same house, sold for $550,000 instead. Preliminary gain is $350,000. Subtract the $27,000 in unreflected selling expenses and the real gain is $323,000. A single filer can exclude $250,000, leaving $73,000 taxable.

On the Form 8949 line, column (g) shows ($277,000): the $27,000 of expenses plus the $250,000 exclusion. Column (h) shows $73,000. Column (f) is still EH.

Don’t Confuse Column (f) Codes With The Checkboxes At The Top

The single biggest trap on Form 8949 is that the same letters appear in two unrelated systems. At the top of each part, you check a box that identifies the kind of information return and whether basis was reported. Inside the form, column (f) carries codes that describe adjustments. The letters overlap; the meanings don’t.

The checkbox labeled “E” at the top of Part II means a long-term sale reported on a 1099-B where cost basis was not reported to the IRS, and it routes those totals to Schedule D line 9.³ Code E inside column (f) means unreflected selling expenses. Checking Box E has nothing to do with putting E in column (f), and putting E in column (f) says nothing about broker basis reporting.

The checkbox labeled “H” at the top of Part I is a newer category for short-term digital asset transactions on Form 1099-DA where basis wasn’t reported.⁴ Code H in column (f) is the home sale exclusion. Mixing them up produces a return that will almost certainly draw an automated notice.

The quick rule: the box at the top describes the information return; the code in column (f) describes the adjustment. They operate independently.

Which Box To Check For A Home Sale

For a Code EH home sale, you check Box D at the top of Part II if the 1099-S reported both gross proceeds and basis to the IRS, or Box F if no 1099-S was filed at all. The totals from a Box D section flow to Schedule D, line 8b; totals from a Box F section flow to Schedule D, line 10.³ Schedule D then combines everything with any other capital items to produce the net figure on line 16, which carries to Form 1040.

Records To Keep

Both halves of an EH entry need documentation. For the Code E piece, keep the sale closing statement showing commissions, title fees, transfer taxes, and other costs. For the Code H piece, keep records that establish ownership, use, and the gain calculation: the original purchase closing statement, receipts and records for capital improvements, the sale closing statement, and any 1099-S you received.

The IRS expects you to hold onto those records until the statute of limitations for the return runs out, which is generally three years from the date you filed.⁵

What Goes Wrong When The Entry Is Off

A 1099-S reporting $450,000 of gross proceeds against a return that reports zero gain is exactly the kind of mismatch that drives the IRS matching system. When the adjustment codes don’t line up with the numbers or the codes are entered incorrectly, the usual result is a CP2000 notice asking you to reconcile the difference.

If the mismatch produces an underpayment, the accuracy-related penalty is 20% of the underpaid tax. It applies to underpayments stemming from negligence or a substantial understatement, which for individuals means understating tax by the greater of 10% of the correct tax or $5,000. The penalty can be avoided if you show reasonable cause and good faith, which is another reason to keep the closing statements and improvement records intact.⁶

The most frequent error with EH isn’t the dollar figure. It’s using the letter the wrong way: entering H in column (f) when you meant to check Box H at the top, or entering E in column (f) thinking it refers to non-covered securities. When a letter could mean two different things, verify against the code table in the Form 8949 instructions before filing.¹

1
Internal Revenue Service. Instructions for Form 8949
2
Internal Revenue Service. Form 8949 – Sales and Other Dispositions of Capital Assets
3
Internal Revenue Service. Instructions for Form 8949
4
Internal Revenue Service. Instructions for Form 1099-DA
5
Internal Revenue Service. Topic No. 305, Recordkeeping
6
Internal Revenue Service. Accuracy-Related Penalty