How does the $250,000 and $500,000 home sale exclusion work?

Section 121 of the federal tax code lets a homeowner exclude a set amount of capital gain on a primary residence sale, with joint filers excluding double what a single filer can, once ownership and residency tests are met. The exclusion reduces gain, the sale price minus cost basis and eligible improvements, not the full sale price. A CPA or tax attorney should confirm eligibility for your situation, since Joel can advise on pricing and marketing the home but not on tax filing.