To qualify for the owner-occupied capital gains exclusion, how long must the owner occupy the home before the sale?

The owner-occupied capital gains exclusion allows homeowners to exclude a portion of capital gains from tax when they sell their primary residence. To qualify for this exclusion, the owner must have occupied the home as their primary residence for two years out of the last five years leading up to the sale. This specific timeframe accounts for any changes in life circumstances, such as moving for a job or other reasons, while still allowing homeowners to benefit from the exclusion if they have lived in the home long enough.

This requirement ensures that the homeowner has developed a genuine connection with the property as their primary residence, rather than merely using it as an investment. The timeframe of two years out of the last five creates a reasonable guideline for residency, balancing flexibility for the homeowner while also establishing eligibility parameters for tax benefits.

Other options lack this precise timeframe requirement. While two consecutive years suggests continuous occupancy, it doesn't consider flexible living arrangements that might still qualify for the exclusion as long as the two-year requirement within the five-year window is met. The option stating that there is an exclusion amount defined as $500,000 is also true but it does not address the occupancy requirements necessary for qualification.