The rule of 2 every five years is a rule that states that you must have lived in your home for a minimum of two of the last five years before the sale date. However, these two years don't have to be consecutive and you don't have to live there on the date of the sale. You can use this rule of 2 every 5 years to exclude your profits every time you sell or change your main home. You can generally apply for the exclusion only once every two years.
For taxpayers with more than one home, a key point is to determine which is the primary residence. The IRS only allows exclusion at a person's primary residence, but there is some leeway in determining which home qualifies. The two-in-five year rule comes into play. Simply put, this means that for the previous five years, if you lived in a house for a total of two years, or 730 days, you may qualify as your primary residence.
The 24 months don't have to be in a certain block of time. However, for married taxpayers who file a joint return, each spouse must comply with the rule.
