If you sell your main home that you owned and lived in as your main residence for at least 2 years, you can exclude up to the first $250,000 of gain if filing single or married filing separately, and up to $500,000 if married filing a joint return.
But, if you used the house in business (home office deduction, partial rental, or similar) you may have to pay recapture tax on any depreciation you took or could have taken while the home was used for business. Depreciation recapture is calculated and taxed before the $250,000 exclusion is calculated.
For spouses who are divorced or separated, the spouse who moved out of the house can still use this exclusion even if they moved out more than 2 years prior, as long as the other spouse still qualifies. (Except that, you generally can't use the exclusion more than once every 2 years. So if you used the exclusion on a different home in the last 2 years, you can't use it now even if you would otherwise qualify.)
If you did not get a 1099-S at closing, you do not need to report the sale on your tax return. If you did get a 1099-S, then each spouse reports half the home's cost basis and half the proceeds, and as long as each person's half of the gain is less than $250,000, it will be excluded by the tax program.
