Definition
Tax exclusion allowing $250,000 (single) or $500,000 (married) capital gains on primary residence sale to be excluded from taxable income.
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Section 121 exclusion eliminates capital gains tax on primary residence if owned and occupied 2 of last 5 years. Major tax benefit for primary residence sales.
Pro Tip
Primary residence is best tax-advantaged investment; use exclusion to minimize gains tax.
Example
Selling primary residence with $150,000 gain; entire gain is tax-free under Section 121 exclusion.