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You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods.
The Primary Residence Exclusion, also known as Section 121 Exclusion, is a critical provision in the U.S. tax code that enables homeowners to exclude a significant portion of the profit made from the sale of their primary residence from their taxable income.
To claim a home as your principal residence, you generally need to live in it for at least two out of the five years before selling the property. This requirement, known as the IRS two-out-of-five-year rule, allows you to qualify for the capital gains tax exclusion on the sale of your home.
You may take the exclusion, whether maximum or partial, only on the sale of a home that is your principal residence, meaning your main home. An individual has only one main home at a time. If you own and live in just one home, then that property is your main home.
In simple terms, this capital gains tax exclusion enables homeowners who meet specific requirements to exclude up to $250,000 (or up to $500,000 for married couples filing jointly) of capital...
Currently, the IRS allows taxpayers to exclude up to $500,000 in capital gains if married filing jointly or $250,000 if single. Let’s say you purchase a home for $400,000. It’s your primary residence and the only home you own. A few years later, you decide to move and sell it for more money.
The principal residence exclusion is a rule used by the Internal Revenue Service that allows people meeting certain criteria to exclude up to $250,000 for single filers or up to $500,000 for...
However, when they sell a primary residence, they qualify for a federal tax exclusion of a $250,000 gain ($500,000 if married and filing jointly) if they meet the following Internal Revenue ...
Updated October 06, 2024. Reviewed by Margaret James. Fact checked by. Amanda Jackson. Part of the Series. Guide to Selling Your Home. Getting Ready to Sell. What Is Real Property? Definition and...
The Internal Revenue Service (IRS) has special rules that allow you to exempt a certain amount of gains when you sell your primary residence. This can save you a lot of money, but only if you understand the rules. This guide to taxation on the sale of your primary residence explains what to expect from a tax perspective when you sell your home.