Definition
Federal tax benefit excluding primary residence capital gains up to $250,000 (single) or $500,000 (married).
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Excludes gains from capital gains tax if owned/lived 2 of last 5 years. Most valuable tax benefit for homeowners. Gains above exclusion subject to capital gains tax. Once per 2 years eligibility. Spouses must meet requirements separately. Losses not deductible. Investment properties don't qualify. Rental component may disqualify. Professional guidance on qualification essential. Planning for this benefit important. Tax-free gains reduce tax burden significantly.
Pro Tip
Verify 2-year ownership/use test before selling primary residence.
Example
Home sale exclusion saved $30,000 in taxes on $200,000 gain.