So the key here is that you lived in the house for at least 730 days or 24 full months during the five years prior to the date of your sale. You can own the home for less then five years and up to $250,000 of profit is tax-free (or up to $500,000 if you are married and file a joint return.
You qualify for the tax break if you meet all three of these tests:
- Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous, nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary residence, then rented it out for two years prior to the sale, for example, you would still qualify under this test.
- Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
- Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.
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