primary residence, how does that exclusion work? so there s $300,000 of potential gain there, which would be subject to capital gains rates. an individual s entitled to exclude $250,000. so the end result is, there s only tax, capital gains tax on the $50,000 that s not covered by the principal residence exclusion. with respect to a home that s been acquired by a married couple, they re entitled to a $500,000 principal residence exclusion. double your money. so in your example where the couple bought the house for $500,000 and sold it for $800,000, they would have all $300,000 excluded and pay no tax on it. what about if the properties you re buying and selling are not your principal residence? that is where you need to be prepared and do it right. usually by what is doing called a 1031 exchange.