Updated October 21, 2026. Quick answer: Worksheet 1 in Publication 523 finds the dollar limit on the gain you can exclude when you sell your main home: $250,000 for most people, $500,000 for joint filers who both meet the tests. If you fall short of the full limit, section B shrinks it by the shortest of your residence, ownership and look-back periods divided by 24 months.
What this worksheet is for
Publication 523 puts the limit first, before any gain is figured. The tests behind it are at home sale taxes and in the home sale capital gains exclusion calculator. Worksheet 2 then computes the gain: Worksheet 2. Worksheet 3 sets the gain against this limit: Worksheet 3.
Section A and section B line by line
| Step | What the worksheet says |
|---|---|
| Rule | “Use this worksheet only if no automatic disqualifications apply, and take all exceptions into account.” |
| Married filing jointly | “Both spouses meet the residence and look-back requirements and one or both spouses meet the ownership requirement.” The maximum exclusion is $500,000. |
| Single or married filing separately | “You meet the residence, ownership, and look-back requirements.” The maximum exclusion is $250,000. |
| Surviving spouse | “You sell your home within 2 years of the death of your spouse.” “You haven’t remarried at the time of the sale.” The maximum exclusion is $500,000. |
| Partial exclusion, step 1 | “Determine the shortest of the following 3 periods:” |
| The three periods | “Your time of residence in the home during the 5-year period leading up to the sale”; “Your time of ownership of the home leading up to the sale”; “The time that has elapsed between the sale and the date you last sold a home for which you took the exclusion, if applicable” |
| Step 2 | “Take the smallest period from Step 1 (you may use days or months) and divide that number by 730 (if using days) or 24 (if using months)” |
| Step 3 | “Multiply the result from Step 2 by $250,000. This is the amount of your reduced exclusion.” |
| Step 4 (joint filers) | “Repeat Steps 1-3 for your spouse and add the two results” |
| Result (part C) | The form leaves a blank for your exclusion limit. “Only gain in excess of this amount is taxable, unless you have gain from full or partial business or rental use.” |
A partial-exclusion example
Illustration, not an IRS example. Every input is invented, and the filer is single.
| Item | Illustration |
|---|---|
| Step 1: months lived in the home in the 5 years before the sale (invented) | 12 |
| Step 1: months owned (invented) | 30 |
| Step 1: months since an earlier exclusion (none taken) | not applicable |
| Step 1: shortest period | 12 months |
| Step 2, computed: 12 divided by 24 | 0.5 |
| Step 3, computed: 0.5 x $250,000 | $125,000 (computed) |
A single filer who lived in the home 12 of the last 24 months has a reduced exclusion of $125,000 here. Gain above that is taxable unless another limit applies.
Joint filers: step 4
For married filing jointly the worksheet works each spouse separately and adds: invented figures, spouse A with an $187,500 reduced exclusion and spouse B with $250,000.
| Item | Illustration |
|---|---|
| Spouse A’s reduced exclusion (invented: 18 months of the 24) | $187,500 |
| Spouse B’s reduced exclusion (invented: 24 months, shortest period 24) | $250,000 |
| Step 4, computed: add the two | $437,500 (computed) |
The sum of $437,500 is this couple’s exclusion limit. It is below the $500,000 full amount because one spouse fell short of the full period.
What sits outside this worksheet
“For use of the entire property for business, rental, vacation, or any other use (other than personal use as a main home), see Business or Rental Use of Home.” Depreciation and nonqualified use are handled on Worksheet 3, not here. If the sale has to be reported anyway, the Form 8949 instructions say: “Report the sale or exchange on Form 8949 as you would if you weren’t taking the exclusion.”
Edition and step numbers
This page reads Publication 523 (2025), the current file irs.gov served on 2026-10-21 (sha256 in the kit data). The Worksheet 1 in it is for the tax year 2025 return, filed in 2026. Check the tax year printed on the worksheet in your own copy and use that year’s line numbers, because a different year’s worksheet can word its lines differently.
Common mistakes
- Using the worksheet when a disqualification applies. It starts with “Use this worksheet only if no automatic disqualifications apply”
- Dividing months by 730 or days by 24. Step 2 divides by 730 for days and by 24 for months.
- Taking the full $500,000 on a joint return when only one spouse meets the residence and look-back tests. The first test is that both spouses do.
Related: home sale taxes, home sale capital gains exclusion calculator, Form 1099-S, and home sales and capital gains guide.
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Answer againSources
- Publication 523 (2025), Selling Your Home: https://www.irs.gov/pub/irs-pdf/p523.pdf
- Instructions for Form 8949 (2025), Sales and Other Dispositions of Capital Assets: https://www.irs.gov/pub/irs-pdf/i8949.pdf
Read from the IRS documents linked above on October 21, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.