No, your entire gain is not tax-free, because the amount of the gain is also income for determining the tax rate on the long term gain. Here’s how it works.
I will suppose you are single. The long term rate is zero up to a taxable income of $47,150, and your standard deduction will be $16,550 (2024 numbers). Let’s assume your taxable income without the house is $30,000. That means that the first $250,000 of gain is excluded from your income. The next $33,700 has a zero rate ($47,150+$16,550), and anything over that has a 15% rate.
