Home-Sale Capital-Gains Exclusion (§121)

Realized gain, $250k / $500k IRC §121 exclusion, and taxable gain. Two-of-five-year and non-qualified-use flags.

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Formula and source

amount_realized = sale_price - selling_costs. adjusted_basis = purchase_price + capital_improvements. realized_gain = amount_realized - adjusted_basis. exclusion = min(realized_gain, cap) when the two-of-five test is met. cap = $250,000 single / $500,000 MFJ. taxable_gain = max(0, realized_gain - exclusion).

26 USC 121 (Internal Revenue Code §121). Cap last amended by TRA-1997; non-qualified-use reduction added by HERA-2008 (effective 2009).

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