Home sale exclusion

The exclusion applies to gain, not to the sale price. Gain is what the sale nets after selling costs, less the adjusted basis: the purchase price plus qualifying improvements. Owners who read the cap against the price they sold for usually conclude they owe tax when they do not.

Two tests gate it. The property must have been owned for a qualifying period and lived in as a main home for a qualifying period within the years before the sale, and the exclusion can only be claimed again after a waiting period. A joint return has a larger cap than a single one.

Gain above the cap is taxed as a capital gain, at long-term rates for a home held long enough. The home sale exclusion calculator splits gain into excluded and taxable, and how investments are taxed is the wider treatment of capital gains tax.

A divorce property proposal raises a different question from the exclusion itself: whether to compare face value with a separate estimated after-tax value. Community Property's California equal-division guide works a full balance sheet twice, once at face value and once at estimated after-tax value, to show why an equal split on paper can be unequal in hand. When the home itself is the asset being divided, its house-in-divorce guide covers the exclusion rules that apply when one spouse keeps the house and the other has already moved out.