You must own the property more than 2 years (calculated from closing date to closing date) and you must live in it as your main home for at least 2 years. Most of the time, you can consider the home as your main home from closing to closing. But if you moved your furniture and took a new lease somewhere else that was significantly before the closing date, the IRS would probably not let that slide.
Both 2 year requirements mean more than 730 days. Exactly 2 years (exactly 730 days) does not qualify because exactly 2 years is not more than 2 years.
If you must close and/or move out in less than 731 days, you may qualify for a partial capital gains exclusion if the sale or move was for certain unforeseen circumstances, like a job change, you have to move for medical necessity, and certain other reasons. In that case you could claim a partial exclusion. The situations that qualify for a partial exclusion are listed in publication 523. https://www.irs.gov/pub/irs-pdf/p523.pdf
The amount of partial exclusion is calculated from whichever is shortest:
- The number of days you owned the home.
- The number of days you lived in the home as your main home.
- The number of days since the last time you claimed the exclusion.
The normal exclusion is $250,000 or $500,000 if married filing jointly. Suppose you closed on the home after owning it for 720 days, you lived in the home as your main home for 699 days, and the last time you used the exclusion was 733 days ago. In that case, you could claim 699/730=95.6% of the usual exclusion limit. Turbotax will calculate this for you. If you claim the partial exclusion for unforeseen circumstances on your tax return, you don't send proof of the circumstances with your return, but keep the proof for at least 3 years in case of audit.
