Before a home is listed, a tax review can help establish how much of the eventual gain may be excluded. The purchase records, improvement receipts and history of how the property was used are relevant to that work.

When gain may be excluded

An owner who has owned and lived in the house as a main home for at least two of the last five years can generally leave up to $250,000 of the gain out of income, or up to $500,000 on a joint return with a spouse. The exclusion is not available if it was already used on the sale of another home in the two years before.

What the IRS says

The IRS sets this out in Tax Topic 701, Sale of Your Home. The owner must have owned the home for at least 24 months out of the last five years, and used it as a residence for at least 24 months of the previous five years. The two tests can be met during different two-year periods.

The topic notes exceptions to the two-year rule and points to IRS Publication 523 for limits on the amount. It also says that an owner who receives a Form 1099-S for the sale must report it even when the gain is excludable.

It is the gain, not the price

The exclusion applies to gain rather than the sale price. The CPA needs records of the purchase, qualifying improvements and selling costs to calculate that gain. Retain the receipts even for work completed twenty years ago.

Why long-time owners ask first

For a long-held home, gather the purchase and improvement records before deciding whether to sell. The potential gain and available exclusion should be calculated from those records rather than from a general assumption about the ownership period.

Include the possible tax cost alongside upkeep, accessibility and the location of family or other commitments. Getting the tax calculation before deciding allows those considerations to be weighed together.

Whether the exclusion applies to you, how much of your gain it covers, how a second home, a rental period, a home office, a spouse's death or a divorce changes it, and what the state side looks like all belong to your CPA.

The note on stay, renovate or move covers the decision this sits inside, and the Lifestyle Calibration page covers how that conversation starts.

Source: IRS, Topic 701, Sale of Your Home. Read at source, October 2026.

This note is general. It is not tax or legal advice, and whether any of the gain on your house is taxable depends on facts only your CPA can assess.