Investors & landlords

Not necessarily. You may qualify for a reduced exclusion for the amount that exceeded $250K. Additionally, if your filing status was Married Filing Jointly, you and your spouse can each possibly qualify for a $250K exclusion, for a combined exclusion of $500K. 

Here is some information on this exclusion: 

Exclusion of Gain: Principal residence 

A principal residence is the taxpayer’s main home, which is the home where he or she ordinarily lives most of the time. A taxpayer can only have one main home at any one time.

Individual homeowners

Individuals can exclude up to $250,000 of gain on the sale of a home if three provisions are satisfied.

1) The individual owned the home for at least two years during the 5-year period ending on the date of sale,

2) The individual used the home as a principal residence for at least two years during the 5-year period ending on the date of sale, and

3) Previous gain exclusion. The individual did not exclude gain from the sale of another home during the 2-year period ending on the date of sale.

Married couples can exclude up to $500,000 of gain on the sale of a home if:

1) The married couple files a joint return for the year,

2) Either spouse (or both spouses) owned the home for at least two years during the 5-year period ending on the date of sale,

3) Both spouses used the home as a principal residence for at least two years during the 5-year period ending on the date of sale, and

4) Neither spouse excluded gain from the sale of another home during the 2-year period ending on the date of sale.

If either spouse does not meet all the requirements, the couple can exclude the total of the exclusions that each spouse would qualify for if not married and the amounts were computed separately. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property.

See IRC Section 121 for further information. 

@octoman