What is the capital gains exclusion clock and why does it matter?

The capital gains exclusion clock refers to the ownership and residency period the IRS requires before a home sale can qualify for that tax break, typically measured over the years right before you sell. Selling too soon after converting a home from a rental to a primary residence, or the reverse, can reset or reduce how much of that period counts. Getting the timing wrong can mean owing tax on gain that would otherwise have been excluded. A CPA can calculate exactly where you stand before you list.