What amount of gain on sale of home is exempt?
When a taxpayer sells their home, they would have a realized gain based on the difference between the price they paid and they price they sold it for. Assuming that the home qualifies as the principal residence and meets the 2 out of 5 year test, a portion of the gain is tax exempt.
The amount of the gain that is tax exempt is based on the taxpayers filing status. If the taxpayer files as “married filing jointly, then up to $500,00 of the gain is exempt. If the taxpayer files as “single”, then up to $250,000 of the gain is exempt.
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What is the 2 out of 5 year test for a principle residence?
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