Also called: Section 121, primary residence exclusion
Up to $250,000 of gain ($500,000 married filing jointly) on the sale of your main home is excluded from income if you owned and lived in it for at least two of the five years before the sale.
The exclusion amounts are fixed in the statute and are not indexed. Gain above the exclusion is a long-term capital gain and counts in MAGI, so a large home sale can raise Medicare premiums two years later.
The exclusion can generally be used once every two years.
In RetIQ, model the sale on the Home / Real Estate card (Inputs → Real Estate). It shows the projected sale price at your sale age alongside today's value, applies the §121 exclusion, deposits the net proceeds less selling costs to your brokerage, and can model buying your next home in the same year. Enter a cost basis to check the exclusion: if the gain exceeds it, the card warns that the excess is not taxed and points you to a Property Sale event. If you also own a rental or second property, use a one-time Property Sale event under Income Events instead.