Who Is Exempt From 1099-S? Homeowners, Corporations, Governments

Four groups are exempt from 1099-S reporting when real estate changes hands: corporations, government units at any level, high-volume real estate dealers who file a sworn certification, and homeowners who sell a principal residence for $250,000 or less ($500,000 if married) and certify in writing that the entire gain qualifies for the Section 121 exclusion. Separately, some transfers aren’t reportable in the first place because they aren’t sales of real property at all, so no one connected to them receives a 1099-S regardless of who they are.

The Principal Residence Exemption

This is the exemption that matters for most homeowners, and it works differently from the others. It’s conditional. The seller has to affirmatively certify, in writing, that the sale qualifies, and the closing agent has to request that certification at or before closing.

Under federal law, the reporting person can skip the 1099-S when the sale price is $250,000 or less and the seller provides written assurance that the entire gain is excludable under Section 121. If the seller certifies they are married, the price ceiling rises to $500,000.¹ The certification language is typically built into the closing documents.

To sign that certification, you have to be able to confirm all of the following:

The property was your main home for at least two of the five years before the sale. The two years don’t have to be consecutive.²
The entire gain falls within the $250,000 exclusion, or $500,000 for joint filers. For the joint amount, both spouses must meet the use requirement and at least one must meet the ownership requirement.²
You haven’t used the Section 121 exclusion on another home sale within the past two years.²

The price thresholds trip people up because they look at sale price, not profit. A single homeowner who sells for $300,000 will get a 1099-S even if the gain is under $250,000. A married couple selling for $480,000 with only $60,000 in gain can certify and avoid the form. A single seller in that same scenario cannot.

Surviving Spouses

A surviving spouse who sells within two years of their spouse’s death can use the $500,000 exclusion even after they’ve started filing as an unmarried individual, provided the requirements that both spouses would have needed to meet were satisfied immediately before the death.² That can also keep the sale below the 1099-S price ceiling.

When You Won’t Qualify to Certify

Some homeowners assume that any Section 121 eligibility gets them out of the form. It doesn’t. The certification requires that the entire gain be excludable, and several common situations break that.

A reduced exclusion is available for sellers who fall short of the two-year ownership or use test because of a job relocation, a health issue, or an unforeseeable event. The reduced amount is figured by dividing the actual time of ownership or use (whichever is shorter) by 24 months, then multiplying by $250,000 or $500,000.³ That’s a partial exclusion, so the seller cannot certify that the whole gain is excludable and will receive a 1099-S. The same is true when the gain exceeds the $250,000 or $500,000 cap.

Business or rental use is another disqualifier. If you ran a home office or rented out a floor, you can still exclude the gain on the residential portion, but any depreciation you claimed on the business portion is subject to recapture and isn’t excludable.³ Because the full gain isn’t excludable, the certification usually isn’t available.

Exempt Sellers

Three categories of sellers are exempt regardless of the sale price or the nature of the property.

Corporations

Sales by corporations are not reported on Form 1099-S. This includes C corporations, S corporations, associations, joint-stock companies, insurance companies, and publicly traded partnerships treated as corporations. When a transaction has both corporate and non-corporate sellers, the reporting person files only for the non-corporate seller.⁴

Government Units

Federal, state, local, and foreign government agencies are exempt, as are international organizations. A city selling surplus land and a federal agency disposing of property both fall on this side of the line.⁴

Exempt Volume Transferors

Sellers who move real estate at scale can qualify for their own exemption. To be an exempt volume transferor, the seller must have sold or expect to sell at least 25 separate items of reportable real estate to at least 25 separate buyers in the current year, or must have done so in either of the two prior years. Every property must have been held primarily for sale to customers in the ordinary course of a trade or business, not for investment. The closing agent can rely on this exemption only after receiving a sworn certification of exempt status from the seller.⁴

Transactions That Aren’t Reportable at All

Some transfers fall outside 1099-S reporting because they aren’t sales or exchanges of real property in the first place. No one receives a 1099-S on these, regardless of who’s involved.

Transactions where the total consideration is less than $600 are treated as de minimis. The reporting person has to be able to confirm that the total value of everything received, not just cash, is below that line.
Gifts, inheritances, and refinancings that don’t involve acquiring new real estate are not sales or exchanges, so no 1099-S is filed.
Leasehold interests are only reportable if their remaining term, counting renewal options, is at least 30 years on the closing date. A lease with 10 years left isn’t an ownership interest for these purposes.
Surface and subsurface natural resources like water, ores, and mineral deposits are not reportable, and neither are burial plots or vaults.
Foreclosures and abandonments are reported on Form 1099-A or Form 1099-C by the lender, not on Form 1099-S.⁴

Timber is the notable exception inside the natural resources category. Standing timber is explicitly listed as reportable real estate, and timber royalties under pay-as-cut contracts must also be reported on Form 1099-S. Mineral rights are not reportable so long as the sale isn’t bundled with other reportable real estate.⁴

Getting a 1099-S Doesn’t Mean You Owe Tax

Plenty of homeowners who qualify for the full Section 121 exclusion still receive the form. It usually means the sale price exceeded the price ceiling, the closing agent couldn’t verify an exemption, or the certification wasn’t provided at closing. A 1099-S doesn’t mean you owe tax; it means the reporting person couldn’t confirm you don’t.

If you get one, you must report the sale on your return using Form 8949 and Schedule D, even if the entire gain is excludable. The IRS received a copy and expects to see the transaction on your return.⁵ Reporting the sale and claiming the exclusion is straightforward and doesn’t create tax liability. Ignoring the form is what triggers an IRS notice.

1
Office of the Law Revision Counsel. 26 U.S. Code 6045 – Returns of Brokers
2
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
3
Internal Revenue Service. Publication 523, Selling Your Home
4
Internal Revenue Service. Instructions for Form 1099-S
5
Internal Revenue Service. Topic No. 701, Sale of Your Home