There are certain additional requirements you must meet to qualify for the $500,000 exclusion. Namely, you must be able to show that all of the following are true:
- you are married and file a joint return for the year
- either you or your spouse meets the ownership test
- both you and your spouse meet the use test, and
- during the 2-year period ending on the date of the sale, neither you or your spouse excluded gain from the sale of another home.
What happens if two married taxpayers file a joint return and one of the taxpayers (but not both) excluded a gain on the sale of a home within the last two years? In that case, the joint filing couple may still exclude gain from a home sale from their gross income, but only up to the $250,000 limit for single taxpayers.
