A document published by the Internal Revenue Service (IRS) that outlines the tax rules applying to the sale of a home. For this document, "home" specifically relates to a principal residence where the taxpayer lives most of the time. Taxpayers may be eligible to exclude all or part of the gain from the sale of a principal residence from income.

In order to exclude gains the homeowner must meet both an ownership test and a use test. The ownership test requires that an individual has owned the home for at least two of the last five years; the use test requires that an individual has lived in the home as a primary residence for two of the past five years.

Gains that cannot be excluded are taxable; losses on the sale of a home cannot be deducted.

Because taxes related to homeownership are a politically sensitive subject, taxpayers should pay close attention to IRS Publication 523 because it may change more frequently than other IRS publications.

Members of the armed forces, the disabled and persons displaced due to home destruction or condemnation may be excepted from ownership and use rules.