The home sale exclusion in plain English, basically is this. If you live in the home as your primary residence for at least 2 of the last 5 years you own it (counting back from the closing date on the HUD-1, that's 730 days of the last 1821 days you owned it) then you qualify for a capital gains tax exclusion of $250,000 if single. If jointly owned and sold, then it's $500,000.
Note that the time lived in it does not have to be consecutive days either. You can live in it for 12 months, rent it out for 36 months, move back into it for 12 more months and if you've owned it at least five years, you're good to go.
