What is the Section 121 exclusion?

The Section 121 exclusion under Internal Revenue Code Section 121 allows qualifying taxpayers to exclude up to $250,000 for single filers or $500,000 for married couples filing jointly in capital gains from the sale of their primary residence in 2025, as detailed in IRS Publication 523. To qualify, homeowners must satisfy the ownership test by owning the property for at least 2 years and the use test by living in the home as their main residence for at least 2 years during the 5 years ending on the sale date. The exclusion can be claimed repeatedly throughout your lifetime with no lifetime cap, provided you meet the qualification tests for each sale and have not claimed the exclusion on another property within the past two years. Gains exceeding exclusion limits are taxed as long-term capital gains at preferential rates ranging from 0% to 23.8%, depending on income level. The Sell your home strategy helps homeowners maximize this valuable tax benefit by planning, documenting, and coordinating it with other wealth-building strategies.

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