Capital Gains Exclusion (Section 121)

The capital gains exclusion, from Section 121 of the tax code, lets most homeowners avoid tax on a large chunk of the profit when they sell their primary residence. A single filer can exclude up to 250,000 dollars of gain, and a married couple filing jointly can exclude up to 500,000 dollars. To qualify, you generally must have owned and lived in the home as your main residence for at least two of the five years before the sale. Gain above the exclusion, or gain on a second home or rental, may still be taxable. Rules on partial exclusions and frequency limits get technical, so confirm your situation with a tax professional. See capital gains selling your RI home.