When you sell a stock, you owe taxes on your gain-the difference between what you paid for the stock and what you sold it for. The same is true with selling a home (or a second home), but there are some special considerations.

How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

Take the purchase price of the home: This is the sale price, not the amount of money you actually contributed at closing.

Add Adjustments:

Cost of the purchase-including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.

Cost of sale-including inspections, attorney's fee, real estate commission, and money you spent to fix up your home just prior to sale.

Cost of improvements-including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

The total of this is the adjusted cost basis of your home.

Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.
A Special Real Estate Exemption for Capital Gains

The current federal limit on how much profit you can make on the sale of your principal residence (that you have held for at least 2 years) before you pay capital gains tax is $500,000 for a married couple and $250,000 for a single homeowner. However, if you are moving due to job relocation, a change in health, or some other unforeseen circumstance, you may be eligible for partial exclusion even if you have owned the home for less than 2 years. There are some limits. Consult your tax advisor.

Unforeseen circumstances have been the most confusing section of the rules, though they point out that the IRS is not heartless when it comes to taxes and hard times. What determined unforeseen circumstances seemed to be considered on a case-by-case basis in the past. Now, the IRS has named an unforeseen circumstance as "an event that the taxpayer could not reasonably have anticipated." In addition, the unforeseen circumstance could affect someone in the household other than the taxpayer, such as the taxpayer's spouse or other dependent who lives in the house.

Safe harbors under the unforeseen section include, but are not limited to:

A natural or man-made disaster or act of war or terrorism resulting in a casualty to the residence.

Death.

The cessation of employment as a result of which the individual is eligible for unemployment compensation.

A change in employment or self-employment status that results in the taxpayer's inability to pay housing costs and reasonable basic living expenses for the taxpayer's household.

Divorce or legal separation under a decree of divorce or separate maintenance; and

Multiple births resulting from the same pregnancy.
If you find yourself in an "unforeseen circumstance" situation, then you may be in luck, as it were, for your hardship. It means you may be able to pay less taxes or be exempt from taxes altogether. The tax would be calculated based on how long you had lived in the property, among other criteria. Consult your tax advisor.