What condition must be met for the home sale exclusion to be applicable?

The home sale exclusion allows homeowners to potentially exclude a significant amount of capital gain from taxation when they sell their primary residence. For this exclusion to apply, one key condition is that the property must have served as the taxpayer's primary residence for at least 2 out of the last 5 years before the sale. This requirement ensures that the exclusion benefits only those who have truly established their home, rather than those who may have acquired a property solely for investment purposes or short-term holding.

This provision reflects a policy to support individuals and families who have made a long-term commitment to a residence, encouraging stability in home ownership. The length of time spent living in the home is critical to establishing it as a primary residence, which is why this condition is emphasized. Other options, such as the duration of ownership or specifics about selling to family members or timing around retirement, are not relevant to simple eligibility for the exclusion.