capital gain

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tax on a home sale. Is there still a 500000-capital gain deduction a a person's first home sale

M-MTax

Level 15

Yes, the $500,000 capital gain exclusion is still in effect. Known as the Section 121 Exclusion, this tax rule allows you to shield up to $500,000 in profit from federal income taxes if you are married filing jointly, or up to $250,000 if you file as a single individual.

Note, it does not have to be your first home sale. Under current rules, you can utilize this tax break multiple times throughout your life—generally up to once every two years—provided you meet specific qualification criteria.

M-MTax

Level 15

To qualify for the full exclusion, you must satisfy what the IRS calls the "Ownership and Use" tests:

Ownership Test: You must have owned the home for at least two years (24 months) out of the five years leading up to the sale date.
Use Test: You must have used the home as your primary residence for at least two years (24 months) out of those same five years.
- Note: These 24 months do not have to be consecutive; they just need to add up to 2 full years within the 5-year lookback period.
Joint Filer Rules: For a married couple to claim the maximum $500,000 exclusion, only one spouse needs to meet the ownership test, but both spouses must meet the residence/use test. They also must not have claimed the exclusion on another home within the past two years.