Get your taxes done using TurboTax

Selling a home can generate tax consequences, but there is an exception whereby a gain on the sale of a primary residence may be excluded from income, called a Section 121 exclusion.  Taxpayers can exclude up to $250,000 ($500,000 if married filing a joint return) gain on the sale of a principal residence if the following eligibility tests are satisfied.

• Ownership test. The taxpayer must have owned the home for at least two years out of the last five years ending on the date of sale. For a married couple filing jointly, only one spouse has to meet the ownership requirement.
• Use test. The taxpayer must have used the home as his or her principal residence for at least two years out of the last five years ending on the date of sale. The two years can fall anywhere within the 5-year period and does not need to be consecutive. Unlike the ownership test, for a married couple filing jointly, both spouses must meet the use test to get the full $500,000 exclusion.
• Previous gain exclusion. The exclusion can only be taken once in a 2-year period. This requirement is satisfied if the taxpayer did not sell another home during the 2-year period before the date of sale or sold a home but did not exclude the gain.

Since you have owned and lived in the home from 2015-2022, you would qualify to exclude up to $500,000 gain on a Married Filing Joint return (provided you have not excluded another gain on sale of home in the last 2 years as well).

You would calculate your gain based on your basis in the home versus the selling price of the home.  The basis in a home received as an inheritance is the home’s Fair Market Value on the date of the decedent’s death or the alternate valuation date, Additionally, you can include the cost of any additions and other improvements that have a useful life of over a year to your basis. 

IRS Publication 523, Selling Your Home, has a lot of information regarding the sale of a home - see this link to the publication:  IRS Publication 523