you could combine your exclusions and use a $500,000 exclusion for one house and then pay the gains tax on the other.
No, you can't combine your exclusion for one house. You must have *BOTH* lived in the house for at least 2 of the last 5 years you owned it. Since each of you did not have an ownership stake in the other's house, that nixes the combining stuff right there. You each get a $250,000 exclusion on the house you own. That's it.
Also, don't file separate. That just makes no sense tax-wise. (unless you like paying more taxes of course.)
