The term "homosexual" is considered outdated, bordering on inflammatory, except when used as an adjective to describe behavior in a clinical or scientific way. Style guides recommend avoiding it as a noun altogether.
The proper term is "gay" or "lesbian," and some people prefer the broader term "queer."
Other euphemisms for "gay" tend to fall on the side of insult, rather than politeness, but here is a short list of neutral or positive euphemisms for gay:
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