Code EH on Form 8949: Selling Expenses and Home Sale Exclusion

On Form 8949, entering “EH” in column (f) means a single transaction carries two adjustments at once: Code E for selling expenses or option premiums that weren’t reflected on the 1099-B, 1099-DA, or 1099-S you received, and Code H for gain on the sale of your main home that you’re excluding under Section 121. The pairing shows up most often on a primary residence sale where the 1099-S reports gross proceeds without accounting for commissions and closing costs, and you also qualify for the $250,000 or $500,000 home sale exclusion.¹

When more than one code applies to the same row, the IRS wants them listed together in alphabetical order, no spaces, no commas. E comes before H, so the entry reads “EH.” Column (g) then gets a single number: the net dollar effect of both adjustments combined.¹

The E Half: Selling Expenses Not on Your 1099

Code E covers selling expenses, option premiums, or digital asset transaction costs that reduced your actual proceeds but don’t appear on the information return the IRS received.¹ On a home sale, that generally means real estate commissions, title fees, transfer taxes, and other closing costs that came off the top of the sale price.

Because those costs reduce the real gain, you enter them as a negative number in column (g). Twenty-seven thousand dollars in unreported commissions and closing fees becomes ($27,000).

The H Half: The Home Sale Exclusion

Code H tells the IRS you sold your main home at a gain and are excluding some or all of that gain under Section 121. If you owned and used the property as your primary residence for at least two of the five years before the sale, you can exclude up to $250,000 of gain as a single filer, or up to $500,000 if married filing jointly.¹

You report the sale as if no exclusion existed, then subtract the excluded portion in column (g) as a negative number. A fully excluded $180,000 gain shows as ($180,000) in column (g), and column (h) comes out to zero.

Filling Out the Row When Both Apply

A home held more than a year goes on Part II of Form 8949 as a long-term transaction. Take a concrete case: you sold your primary residence of twelve years for $450,000, your purchase price plus improvements totaled $200,000, closing costs of $27,000 weren’t reflected on the 1099-S, and you file single.

Column (a) — description of the property, for example “Primary Residence, 123 Main St.”
Column (b) — date you originally acquired the home.
Column (c) — date of the sale.
Column (d) — gross proceeds from the 1099-S: $450,000.
Column (e) — cost basis including purchase price and capital improvements: $200,000.
Column (f) — EH, no space, no comma.
Column (g) — the net of both adjustments. Selling expenses are ($27,000). Actual gain after those expenses is $223,000, which is under the $250,000 single-filer cap, so the exclusion piece is ($223,000). The combined entry is ($250,000).
Column (h) — proceeds minus basis plus the adjustment: $450,000 − $200,000 − $250,000 = $0.²

When the Gain Exceeds the Exclusion

Change one number in the same example. The house sold for $550,000 instead of $450,000. Preliminary gain is $350,000. Subtract the $27,000 in selling expenses and actual gain is $323,000. You can exclude $250,000, leaving $73,000 taxable.

Column (g) shows ($277,000), which is the $27,000 in expenses plus the $250,000 exclusion. Column (h) shows $73,000. Column (f) still reads EH; the code entry doesn’t change when the exclusion runs out, only the dollar figure does.

Checkbox E and Checkbox H Are Not Column (f) Codes

This is the single largest source of error on Form 8949. The same letters appear in two unrelated systems on the form. The boxes at the top of each part categorize the transaction by what information return you received and whether basis was reported. The letters in column (f) explain adjustments. They overlap in spelling and share nothing in meaning.

Box 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 the totals feed Schedule D line 9.³ Code E in column (f) means unreflected selling expenses. Checking Box E does not put E in column (f), and putting E in column (f) says nothing about whether the broker reported your basis.

Box H at the top of Part I is the short-term category for digital asset transactions reported on Form 1099-DA where basis was not reported.⁴ Code H in column (f) has no connection to digital assets; it’s the home sale exclusion. Mixing these up sends the IRS a signal that doesn’t match your transaction and often produces an automated notice.

The rule to hold onto: the checkbox says what kind of information return you got. The column (f) code says why you’re adjusting the gain or loss. They travel on separate tracks.

Where the Numbers Go on Schedule D

Which line on Schedule D receives your Form 8949 totals depends on which box you checked at the top of Part I or Part II, not on the code in column (f).³ For a typical home sale reported with Code EH, you’d check Box D if the 1099-S reported gross proceeds and basis to the IRS, or Box F if no 1099-S was filed. Schedule D combines those totals with any other capital gain items and carryovers, computes the net figure on line 16, and passes it to Form 1040.

What to Keep

Both halves of an EH entry need paper behind them. For the E piece, that’s the closing statement from the sale itemizing commissions, title charges, transfer taxes, and other selling expenses. For the H piece, that’s your original purchase closing statement, records of capital improvements that build basis, and documentation showing you owned and used the home as your primary residence for the required period. Any 1099-S you received belongs with the file.

The IRS generally has three years from the date you filed to assess additional tax, six years if you omitted more than 25% of gross income, and no time limit for a fraudulent return or an unfiled year.⁵ Hold the sale records at least through the three-year window as a floor.

If the Code Is Wrong

A 1099-S reporting $450,000 in gross proceeds paired with a return showing zero gain will look normal to IRS matching software only if the adjustment reconciles cleanly. When the code doesn’t fit the adjustment, or the math doesn’t add up, the automated system can issue a CP2000 notice proposing additional tax.

If the mismatch produces an underpayment, the accuracy-related penalty is 20% of the underpaid tax. It applies to underpayments caused by negligence or a substantial understatement, which for individuals means understating tax by the greater of 10% of the correct amount or $5,000.⁶ The penalty doesn’t apply where you can show reasonable cause and good faith, which is another reason the records above matter even when your return is right.

The mistake to watch for isn’t usually the dollar figure. It’s entering Code H when you meant checkbox H, or reading Code E as something about non-covered securities rather than selling expenses. When a code feels ambiguous, the full code table in the Form 8949 instructions lists each letter with its description.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 1099-DA
5
Internal Revenue Service. Topic No. 305, Recordkeeping
6
Internal Revenue Service. Accuracy-Related Penalty