In most cases your home is exempt. The single biggest asset many people have is their home, and depending on the real estate market, a homeowner might realize a huge capital gain on a sale. The good news is that the tax code allows you to exclude some or all of such a gain from capital gains tax, as long as you meet three conditions:
1. You owned the home for a total of at least two years in the five-year period before the sale. 2. You used the home as your primary residence for a total of at least two years in that same five-year period. 3. You haven't excluded the gain from another home sale in the two-year period before the sale.
If you meet these conditions, you can exclude up to $250,000 of your gain if you're single, $500,000 if you're married filing jointly.
It is best for you to consult your accountant to know what is best for your particular situation.