CORRECTION: on a joint return only one spouse has to own the home. Both must use it as their principal residence for 2 out of 5 years for the maximum exclusion of $500,000. the 2 years so not have to be consecutive. one other rule the exclusion can not have been used for another principal residence in the 2 years ending on the date of sale of the current residence. if there was a previous exclusion in this period by either spouse, the current exclusion will be limited.
