What Is the Section 121 Exclusion?

The Section 121 exclusion lets you exclude up to $250,000 of profit from the sale of your main home from federal income taxes — $500,000 if you're married filing jointly. To qualify, you must have owned and used the home as your primary residence for at least 2 of the last 5 years before the sale. You can use this exclusion as often as every two years. Any gain above the exclusion is taxed as a capital gain. Partial exclusions are available if you moved due to a job change, health, or unforeseen circumstances.