why are you selling?
1)if it's due to a change in place of employment (to qualify for this the new place of employment must be at least 50 miles farther from the taxpayer's old home than the former place of employment was) or
2) health reasons - must be primary reason to obtain, provide or facilitate the diagnosis, cure, mitigation or treatment of a disease, illness or injury
3) unforseen circumstances - such as destruction of the home, divorce or legal separation for the party that must move out, criminal activity in the neighborhood, excessive airport noise and various other items contain in IRS letter rulings
anyway if one of these applies a reduced exclusion is available. its prorated based on the smaller of the time period the homeowner meets the ownership and use requirements or the time period period between the most recent sale of a home where the home sale exclsuion was used.
for spouses, if one of you owned the property for 2 out of 5 years before sale and both occupied the property as your principal residence for two out of 5 years the full exclusion is available ($500,000). any depreciation taken is not eligible for the exclusion.
