valuation
principal residence exclusion
A federal tax rule allowing homeowners to exclude up to $250,000 of gain ($500,000 for married couples filing jointly) from the sale of their main home if they owned and lived in it for at least two of the five years before the sale. The exclusion can generally be used once every two years. Gains above the limit may be taxable.
- Exam tip
- Know the numbers: $250,000 single, $500,000 married filing jointly, and the 2-out-of-5-years ownership and use test.
- Example
- A married couple who lived in their home for six years sells it for a $420,000 gain and owes no federal tax on that gain.
Related terms & state variants
Sources
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Last verified: 2026-10-23