How much capital gains tax exemption is a married couple that has lived in their home for the past three years eligible for?

How much capital gains tax exemption is a married couple that has lived in their home for the past three years eligible for?

• A. $250,000
• B. $500,000
• C. $750,000
• D. $1,000,000

Answer: (B)

When selling a primary residence, you may exclude part of the gain from capital gains tax. For married couples filing jointly, the exclusion is up to $500,000, provided you have owned and lived in the home as your main residence for at least two of the last five years and haven’t used the exclusion in the previous two years. Since this couple has lived there for the past three years, they meet the use requirement, and as a married couple, they qualify for the full $500,000 exclusion. If their gain is less than $500,000, all of it is tax-free; if it’s more, only the amount above $500,000 is taxable, subject to other rules.

When selling a primary residence, you may exclude part of the gain from capital gains tax. For married couples filing jointly, the exclusion is up to $500,000, provided you have owned and lived in the home as your main residence for at least two of the last five years and haven’t used the exclusion in the previous two years. Since this couple has lived there for the past three years, they meet the use requirement, and as a married couple, they qualify for the full $500,000 exclusion. If their gain is less than $500,000, all of it is tax-free; if it’s more, only the amount above $500,000 is taxable, subject to other rules.