Two Hundred And Fifty Thousand, Fixed

The statute caps the gain excluded under this section at TWO HUNDRED AND FIFTY THOUSAND DOLLARS, with FIVE HUNDRED THOUSAND DOLLARS substituted for joint returns meeting the further conditions the statute sets out. Both figures are written into the text itself, not delegated to an annually adjusted table the way many other thresholds in this code are.

Unlike many thresholds elsewhere in the tax code, these amounts carry no inflation adjustment in the statutory text. A home bought decades ago in an appreciating market can produce a gain that has grown far faster than the exclusion meant to shelter it, so a couple who assumes '500,000 covers a typical sale' is checking that assumption against a number the market has been quietly outrunning for years. The exclusion has not shrunk — it has simply stayed still while everything around it moved.

The exclusion requires that during the FIVE-YEAR PERIOD ENDING ON THE DATE OF THE SALE, the property was OWNED AND USED by the taxpayer as a principal residence for periods AGGREGATING TWO YEARS OR MORE. Aggregating, not necessarily continuous — the same word that does the same work in the residency tests elsewhere on this surface. A property rented out for part of the five years and lived in for the rest can still qualify if the arithmetic reaches two years.

Section 121's own text sets no requirement tied to citizenship or immigration status — the ownership-and-use test is the whole of the eligibility rule as written. A nonresident alien who otherwise satisfies it is not excluded by anything in this section. The statute does carve out one related group: the section DOES NOT APPLY to a sale by an individual to whom the exit-tax treatment under section 877(a)(1) applies — a covered expatriate in the period that provision reaches — which is a different and narrower exclusion than a blanket citizenship bar.