It is a potentially taxable transaction; however, if you lived there for any 24 out of the last 60 months, then you are eligible to exclude the gain. TO EXCLUDE GAIN ON THE DISPOSITION OF A HOME from income under IRC section 121, a taxpayer must own and occupy the property as a principal residence for two of the five years immediately before the sale. ... The law permits a maximum gain exclusion of $250,000 ($500,000 for certain married taxpayers).
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