What if I lived in the house less than 2 full years, or sold another primary residence less than 2 years ago?
Taxpayers who do not meet the two-year ownership and use test or use the Section 121 exclusion more than once in a two-year period may qualify for a reduced exclusion. A reduced exclusion is available if the primary reason the taxpayer sold a main home was due to a change in employment location, health, or unforeseen circumstances. A prorated gain exclusion is based on the smaller of the time period the homeowner meets the ownership and use requirements or the time period between the most recent sale of a home.
