Full Exclusion
A home owner may sell a personal residence and exclude, from gross income, up to:
- $250,000 for a single person
- $500,000 for a married couple filing a joint return
This exclusion is generally available if the following conditions are met:
- Seller owned and used the property as a principal residence for two out of the last five years prior to the sale.
- Seller has not sold another principal residence in the two years
prior to the sale.
- No portion of the residence was used for rental or business
purposes (includes
office in home) after May 6, 1997.
- One of the following is true:
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- Entire home sold for $250,000 or less
- Seller is married, the entire home is sold for $500,000 or less, and
the gain on the sale is $250,000 or less, or
- Seller is married, the entire home sold for $500,000 or less, the
seller is filing a joint return and the sellers spouse used the home
as a principal residence for two out of the prior five years, and
the spouse has not sold a home within the two prior years.
Partial Exclusion
A partial exclusion of a gain may apply if:
- Taxpayer(s) owned a home on August 5, 1997 and sold the home
for any reason before August 5, 1999.
- Taxpayer(s) sold a home due to a job relocation*, health reasons,
or other "unforeseen circumstances."
The prorated exclusion of the gain is based on the number of days that the ownership and use requirements bear to the two year requirement (e.g., If the home is only owned and used for 1 year, then up to $125,000 for a single taxpayer or $250,000 for taxpayers filing a joint return will apply.)
*A job relocation does not have to meet the rules that qualify for a moving expense deduction.
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