Intuit Academy Tax Level 1 Practice Test

When selling a primary residence that has been owned and used as such for at least two years, a homeowner may qualify for a capital gains exclusion. For individual taxpayers, the maximum gain that can be excluded from capital gains tax is $250,000. If the homeowner is married and filing jointly, this exclusion doubles to $500,000.

Since the question specifically asks about the exclusion for an individual, the correct answer is that $250,000 of gain can be excluded. This exclusion applies to the profit made from the sale of the home, directly reducing the taxable amount and providing significant tax relief to homeowners.

It's important to note that for the exclusion to apply, certain requirements must be met, such as the ownership and use tests, where the individual must have lived in the residence for at least two of the last five years before the sale. This ensures the benefits of the exclusion are geared towards those who genuinely occupy the property as their primary residence, promoting homeownership and stability.