TCP Individual Planning · Updated November 2026
Sold Your Home for a Gain. Is All of It Taxable?
Section 121 can exclude qualifying principal-residence gain when ownership, use, timing, and other requirements are met.
Ownership test
The taxpayer generally must satisfy the applicable ownership requirement during the statutory testing period.
Use test
The taxpayer generally must use the property as a principal residence for the required period.
Partial exclusion
Specified employment, health, or unforeseen-circumstance changes can allow partial treatment under applicable rules.
Depreciation
Certain depreciation associated with business or rental use can remain taxable even when other gain qualifies for exclusion.
The takeaway
Home-sale planning requires ownership, use, timing, prior exclusions, and depreciation analysis.
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FAQ
Does every home sale qualify?
No.
Can partial exclusions exist?
Yes.
Can prior depreciation affect the result?
Yes.