not every year because ownership and occupancy must be at least two years for the full exclusion and there is a frequency limitation: for married couples - during the 2 year period ending on the date of sale, neither spouse excluded gain from the sale of another home. if the frequency test is not met, the allowable exclusion is limited to the sum of the amounts each spouse would be qualified to exclude if they had not been married.
under certain conditions, a partial exclusion may be available
by the way on your wife's sale of her old house, since it was a rental, depreciation will have to be recaptured before the $250K HSE would apply.
