Updated October 24, 2026. Quick answer: Tax Topic 701 is the IRS page on the home sale gain exclusion. It says you may be able to exclude up to $250,000 of gain from the sale of your main home, or up to $500,000 on a joint return. To qualify you must meet both an ownership test and a use test.
Quick reference
| Item | What the IRS topic says |
|---|---|
| The exclusion | “you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.” |
| The two tests | “In general, to qualify for this exclusion, you must meet both the ownership test and the use test.” |
| Ownership test | “If you or your spouse owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of the sale, you meet the ownership test.” |
| Use test | “If you and your spouse used the home as a residence for at least 24 months (2 years) of the previous 5 years, you meet the use test.” |
| Reporting | “Use Schedule D (Form 1040), Capital Gains and Losses and Form 8949, Sales and Other Dispositions of Capital Assets when required to report the home sale.” |
| Where to read more | “Publication 523, Selling Your Home provides rules and worksheets.” |
The ownership and use tests
The topic begins with the size of the exclusion. The IRS topic says “you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.”
On joint filers, it says “If you are filing jointly with your spouse, either you or your spouse must meet the ownership test while both you and your spouse must meet the use test individually.” On timing, it adds “You can meet the ownership and use tests during different 2-year periods.” It then sets the outer limit: “However, you must meet both tests during the 5-year period ending on the date of the sale.”
The topic also names a limit tied to an earlier sale: “Generally, you’re not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.” Our home sale exclusion limit worksheet and home sale taxes page cover the same ground in more detail.
Reporting the sale
The topic says that an excludable gain can still need to be reported. “If you receive an informational income-reporting document such as Form 1099-S, Proceeds From Real Estate Transactions, you must report the sale of the home even if the gain from the sale is excludable.”
It adds “Additionally, you must report the sale of the home if you can’t exclude all of your capital gain from income.” The forms it names are Schedule D and Form 8949. See our pages on Schedule D (Form 1040), Form 8949 and Form 1099-S.
Military and installment sales
For service members and some others, the topic says “you may elect to suspend the five-year test period for up to 10 years.” It describes qualified official extended duty as being “At a duty station that’s at least 50 miles from your main home, or”
On sales paid over more than one year, it says “Even if you use the installment method to defer some of the gain, the exclusion of gain on the sale of your home remains available.” It points to Topic no. 705 and to Form 6252 for those sales.
Where this comes from
This page describes the IRS page titled Topic no. 701, Sale of your home, as served on irs.gov on October 24, 2026. The IRS page shows that it was last reviewed or updated on 12 Oct 2026. The IRS can change a topic after we read it, and the IRS page controls. General information, not tax or legal advice.
Common mistakes
- Assuming the exclusion is automatic. The topic says you must meet “both the ownership test and the use test”
- Thinking an excludable sale never has to be reported. The topic says you must report it “even if the gain from the sale is excludable” when you receive Form 1099-S
- Assuming the two years must be the same period for both tests. The topic says you “can meet the ownership and use tests during different 2-year periods”
- Overlooking the earlier sale rule. The topic says you are generally not eligible if “you excluded the gain from the sale of another home during the two-year period”
- Reading the topic as the full rule set. It sends readers to “Publication 523 for the complete eligibility requirements”
Related: IRS tax topics by number, Home sale exclusion limit worksheet, Home sale taxable gain worksheet, Home sale gain or loss worksheet, Form 8949 code H: home sale exclusion, and Home sale taxes.
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Answer againSources
- IRS, Topic no. 701, Sale of your home (irs.gov): https://www.irs.gov/taxtopics/tc701
- IRS, Tax topics index (irs.gov): https://www.irs.gov/taxtopics
Read from the IRS pages linked above on October 24, 2026. General information, not tax or legal advice. The IRS topic page and the instructions for your own form control, and your own facts decide the outcome.