one-time home sales income tax exemption

A one-time federal income tax exemption that lets homeowners avoid paying some capital gains taxes on the sale of their home. In order to qualify, the home must have been the principal residence for at least two of the past five years. Married couples filing jointly can exempt up to $500,000 of capital gains taxes while single people can exempt $250,000 from the gain on the sale of their house. Proceeds don’t have to be reinvested in another home to earn the tax exemption. Originally this exemption was only available to people 55 years and older, but it was expanded to include all homeowners in 1997.