For how long must a buyer typically reside in a home to avoid capital gains tax on the sale?

To avoid capital gains tax on the sale of a home, a buyer is typically required to reside in the property for at least two years. This requirement is referred to as the ownership and use test, which allows homeowners to exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) from their taxable income if they meet the criteria.

The two-year period does not have to be continuous; however, the homeowner must have lived in the home as their primary residence for a total of two years out of the five years preceding the sale. This provision encourages stability in homeownership and provides significant tax relief for those who fulfill the residency requirement, making it clear why two years is the correct timeframe to qualify for the exemption.