What is Home sale exclusion (Section 121)?
In short
Section 121 lets taxpayers exclude up to $250,000 of gain ($500,000 for married couples filing jointly) on the sale of their principal residence if they owned and used it as their main home for at least two of the five years before the sale.
Key takeaways
- The exclusion can generally be used only once every two years.
- A reduced exclusion may apply if the taxpayer moves early because of a job change, health or unforeseen circumstances.
- Losses on the sale of a personal residence are not deductible.
Where it's tested
REG: Property Transactions: Gains, Losses & Like-Kind Exchanges — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A single taxpayer sells the principal residence they have owned and lived in for 10 years, realizing a $300,000 gain. How much gain is taxable?