US Guide Hub: US Retirement Guide

For many older homeowners, selling a long-time residence can create a large gain on paper. Federal tax law may allow you to exclude part or all of that gain under IRS Section 121 . This is not a senior-only benefit: the same core rules apply regardless of age. The key question is whether the property was your main home and whether you meet the ownership, residence, and timing tests. A home sale exclusion depends on your facts, records, and the timing of the sale. 1. The Section 121 Home Sale Exclusion If you have a gain from selling your main home, you may be able to exclude up to $250,000 of gain from federal income tax. A married couple filing a joint return may be able to exclude up to $500,000 . The exclusion applies to gain , not the full sale price. Your gain is generally calculated as: Selling price − selling expenses − adjusted basis = gain or loss Your adjusted basis may include the original purchase price, certain closing costs, and qualifying capital improveme...