Do we still get the $500,000 exclusion after divorce?

Two limits

IRS Publication 523 sets the numbers. A seller can exclude up to $250,000 of gain on a main home, or up to $500,000 for a married couple filing a joint return, as long as they meet the ownership and use tests. Gain is not the same as sale price, and only your CPA can work out yours.

This is a tax question. I'm not a CPA.

Timing and filing status

Because the larger limit belongs to joint filers, when you close and how you file that year are connected. Some couples look at whether to sell before or after the divorce partly for this reason, and should we sell before or after filing? covers the other factors. Bring your CPA a likely closing date and your purchase records before you set the timeline.

Don't guess at the filing year.

If you sell while you're still married and file jointly that year, the $500,000 limit may be available to you, but only your CPA can confirm that you meet the ownership and use tests and that a joint return makes sense for you.

Rules written for divorcing sellers

Publication 523 has several rules aimed at divorce. If your spouse transferred the home to you, you count their ownership time as yours. You can count the home as your residence while your former spouse is allowed to live there under a divorce or separation instrument and uses it as a main home, which I moved out years ago explains. And divorce or legal separation is an unforeseeable event that can qualify you for a reduced exclusion if you don't meet the full tests.

For transfers between you, see is transferring my share to my spouse taxable?

Each rule has its own conditions.

Questions for your CPA

Go in with specific questions. Ask how much gain you'd have at a realistic price, which limit applies in the year you expect to close, and whether the transfer rules or the reduced exclusion could matter if one of you keeps the house for a while first. Bring numbers. The equity split tool gives you a likely price to start from, though equity and taxable gain aren't the same figure.