What is the maximum tax-free gain for a married couple selling their personal residence?

What is the maximum tax-free gain for a married couple selling their personal residence?

• A. $125,000
• B. $250,000
• C. $500,000
• D. unlimited

Answer: (C)

The maximum tax-free gain for a married couple selling their personal residence is $500,000. This amount applies under the Internal Revenue Code Section 121, which allows homeowners to exclude a portion of the capital gains from the sale of their primary residence when specific criteria are met. To qualify for this exclusion, the couple must have owned and used the home as their principal residence for at least two out of the five years preceding the sale. This $500,000 exclusion can be especially beneficial for couples who may have experienced significant appreciation in their property's value, as it effectively reduces the taxable gain from the sale. Other options such as $125,000 and $250,000 represent exclusions available for single filers or incorrect interpretations of the regulations. There is no provision for an unlimited exclusion; thus, it’s essential to understand the specific context and limits set by the IRS for tax exclusions related to capital gains on the sale of a principal residence.

The maximum tax-free gain for a married couple selling their personal residence is $500,000. This amount applies under the Internal Revenue Code Section 121, which allows homeowners to exclude a portion of the capital gains from the sale of their primary residence when specific criteria are met.

To qualify for this exclusion, the couple must have owned and used the home as their principal residence for at least two out of the five years preceding the sale. This $500,000 exclusion can be especially beneficial for couples who may have experienced significant appreciation in their property's value, as it effectively reduces the taxable gain from the sale.

Other options such as $125,000 and $250,000 represent exclusions available for single filers or incorrect interpretations of the regulations. There is no provision for an unlimited exclusion; thus, it’s essential to understand the specific context and limits set by the IRS for tax exclusions related to capital gains on the sale of a principal residence.