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Home Sale Exclusion for a Surviving Spouse

§ 121 and § 1014 · reviewed September 6, 2026

Shows how much profit a surviving spouse can sell the house for without tax, and how the answer changes after two years. About

In plain words. When you sell your main home, up to $250,000 of profit is tax-free, or $500,000 for a married couple. A widow or widower keeps the couple's $500,000 for a sale within two years of the death, then drops to $250,000. And because the late spouse's share of the house got a fresh tax cost at death, the profit being measured is smaller than it looks. This tool combines the two rules and shows the taxable profit inside the window and past it.

Why it matters. The two-year window is a real deadline with a real dollar difference, and it is easy to miss while everything else after a death is being handled.

An example. A home bought for $200,000, worth $900,000 at the death, sold for $1,200,000 eighteen months later: the taxable profit is $150,000. The same sale at thirty months would leave $400,000 taxable.

Where it stops. It assumes the home was your main residence with no rental or home-office use, no earlier home-sale exclusion in the last two years, and no remarriage before the sale. Everything it leaves out.

$

The purchase price plus what you spent on improvements over the years.

$

The market value on the date of death. An appraisal from around that date is the usual source.

Inside the 2-year window, so the $500,000 married-couple exclusion still applies.

How the home was held

Your spouse's half resets to its value at death. Your half keeps its original cost.

Did you or your spouse own it and live in it for two of the last five years?
Taxable gain on the sale
$150,000
Only the gain left after the exclusion is taxed. The home's cost for tax purposes, its basis, is $550,000 after the death, so the gain on this sale is $650,000. The exclusion then takes $500,000 of that off, the full married-couple amount, because the sale is within 2 years of the death. The same sale after the window would leave $400,000 of gain taxable.
Where the gain on a $1,200,000 sale goesThree bars. $350,000 of gain was erased by the step-up at death. $500,000 is covered by the home sale exclusion. $150,000 is taxable.$0$100k$200k$300k$400k$500k$350kErased by the step-upat death$500kExcludedhome sale exclusion$150kTaxablelong-term gain
Federal tax on the taxable gain
$22,500 to $35,700
At the 15% rate, or at 20% plus the 3.8% investment surtax
Time left in the 2-year window
6 months
$500,000 exclusion until then, $250,000 after
Gain erased by the step-up at death
$350,000
Never taxed, to you or to anyone

Two rules work together. The step-up resets the cost of your spouse's share of the home to its value at death, so only the gain since then, plus the gain on your own share, can be taxed. The exclusion then takes $500,000 of that gain off if you sell within 2 years of the death, and $250,000 after that. The window runs from the date of death to the date of sale. Remarrying before the sale ends it.

This follows the federal home sale exclusion for a surviving spouse, stacked on the step-up in basis at death. It assumes a long-term gain, no depreciation from a home office or rental use, no years when the home was not your main residence, no other home sale exclusion in the prior two years, and no state tax. In Illinois a home held jointly with a spouse steps up by half, which is what the joint choice above does. Educational, not advice.

This is a simplified model, not your actual tax return or plan. It only knows what you type in, leaves out rules that may apply to you, and cannot weigh the other facts and trade-offs a real decision depends on. Before you act, talk with a professional who knows your whole situation.

Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.