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You are entitled to the $250,000 exclusion if you have lived in the home two of the past five years. In addition, you are allowed to add the cost of renovations and upgrades to the original cost of the home. For example, if you gave $144,000 for the home and you add the $300,000 cost of renovation and upgrades for a total of $444,000. If you sell the home for $439,000 gross (not accounting for seller fees) you will have a non deductible loss of $5000. I say non deductible loss because you are not allowed to take a tax deductible loss on a personal asset.I hope this answers your question. If not, I will do my best to clarify. I look forward to your reply. Stephanie