If you sell your primary residence, you may exclude up to $500,000 of gain if filing jointly or $250,000 if filing single. To qualify for the $500,000 exclusion, one spouse must meet the ownership test, and both must meet the use test.

If your spouse dies and you have not remarried, you may claim up to the $500,000 exclusion if the home sold was your principal residence, the sale occurs within two years of your spouse’s death and all requirements for the exclusion were met before your spouse’s death.

You may qualify for a reduced exclusion if you sell your primary residence before two years due to an employment change, health reasons, or other unforeseen circumstances.

When calculating potential gain from the sale, the cost of your home will include the purchase price plus acquisition costs (legal fees, title insurance, transfer taxes) and any capital improvements that increase the value or extend the life of the home.

Common examples of capital improvements include the following: Room additions (bedroom, bathroom, garage, deck), kitchen and basement remodeling, roof, siding, and window replacements, HVAC, plumbing, and electrical system upgrades, insulation, new flooring, landscaping, driveways, swimming pools, and permanent outdoor structures.