Excluding the Gain

You may qualify to exclude from your income all or part of any gain from the sale of your main home. This means that, if you qualify, you will not have to pay tax on the gain up to $250,000(Single). $500,000 if you are married and file a joint return for the year. Maximum Exclusion You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true.

You meet the ownership test.
You meet the use test.
During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. Ownership and Use Tests
Owned the home for at least 2 years (the ownership test), and
Lived in the home as your main home for at least 2 years (the use test).

Reduced Maximum Exclusion You can claim an exclusion, but the maximum amount of gain you can exclude will be reduced if either of the following is true.
 

You did not meet the ownership and use tests, but the reason you sold the home was:
1.A change in place of employment,
2.Health
3.Unforeseen circumstances (as defined later).
1)An involuntary conversion of your home.
2)Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible.
3)Death
4)Unemployment (if the individual is eligible for unemployment compensation)
5)A change in employment or self-employment status that results in the individual’s inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses next) for his or her household
6)Divorce or legal separation
7)Multiple births resulting from the same pregnancy.
8)An event the Commissioner of IRS determined to be an unforeseen circumstance in published guidance of general applicability. For example, the Commissioner determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance.