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Category: Tax Advice

Do I qualify for either the Maximum Exclusion or the Reduced Maximum Exclusion for the sale of my home?

When you sell your home, many times you can exclude up to $250,000 ($500,000 if married filing jointly) of the profit that you make from the sale. There are 2 exclusions that you may qualify for: the Maximum Exclusion or Reduced Maximum Exclusion. To include these exclusions and report the Sale of your Main Home in TaxSlayer you will go under the Federal Section >> Income>> Enter Myself >> Capital Gains and Losses >> Sale of Main Home Worksheet. TaxSlayer will calculate the exclusion from the information provided.

Maximum Exclusion

The maximum exclusion is the maximum amount of the profit that you made from selling your home that you can exclude from your income. Generally, this is $250,000 ($500,000 if married filing jointly). To determine if you qualify for the maximum exclusion, just answer the following questions:

Question 1: Go back 5 years from the date that you sold your home. For example, if you sold your home on 02/01/2013, you want to consider 5-year period from 02/01/2008 through 02/01/2013. During that 5-year period, did you own the home for at least 2 years?
Yes: Go to question 2.
No: You do not qualify for the maximum exclusion. However, you may qualify for a reduced maximum exclusion (see below).

Question 2: During that same 5-year period (from Question 1), did you live in the home as your main home for at least 24 months? Note: Even if you did not use the house as your main home for 24 consecutive months, you can still answer "Yes". As long as you used the home as your main home for a total of at least 24 months during that 5-year period, you can generally answer "Yes" to this question.
Yes: Go to question 3.
No: You do not qualify for the maximum exclusion. However, you may qualify for a reduced maximum exclusion (see below).

Question 3:
Go back 2 years from the date that you sold your home. For example, if you sold your home on 02/01/2013, you want to consider 2-year period from 02/01/2010 through 02/01/2013. During that 2-year period, have you excluded the gain from the sale of another home on your tax return?
Yes: You do not qualify for the maximum exclusion. However, you may qualify for a reduced maximum exclusion (see below).
No: You qualify for the Maximum Exclusion.

Reduced Maximum Exclusion

Even if you do not qualify for the Maximum Exclusion, you may still qualify to exclude a reduced amount. This reduced amount is called the Reduced Maximum Exclusion. To determine if you qualify for the Reduced Maximum Exclusion, you need to first determine the primary reason that you sold your home. Generally, you would qualify for the Reduced Maximum Exclusion if the primary reason was:

  • Because you changed your place of employment,
  • Because of health issues, OR
  • Because of unforeseen circumstances.

If you sold your home for any of the above reasons, you will generally qualify for the Reduced Maximum Exclusion.

For a list of things to consider when determining the "primary reason" for selling your home, you would need to view pages 13 and 14 of IRS Publication 523, Selling Your Home.