Selling Your Home & Your
Taxes
Under prior law... (generally
pre-98), individuals were entitled to a once-in-a-lifetime
exclusion of gain from the sale of their principal
residence. To qualify for that exclusion, the taxpayer
or spouse must have reached the age of 55 prior
to the sale and they must have resided in the home
for 3 of the prior 5 years. Having exercised that
exclusion does not bar a taxpayer from qualifying
for the current law exclusion.
Under current law... there is
no age requirement associated with the exclusion.
The period of time the home must be owned and occupied
as a principal residence has been reduced to 2
out of the past five years. In addition, the exclusion
amount has been raised to $500,000 for couples
filing jointly and $250,000 for other individuals.
The once-in-a-lifetime limitation has been deleted,
thus permitting taxpayers to exclude a gain every
two years if they meet all of the other conditions.
CAUTION: Prior law included
a provision for the deferral of gain allowing
taxpayers to avoid taxation on a gain that was
not excludable if their replacement residence
met certain qualifications. The new law contains
no deferral provisions, thus any gain not excludable
is immediately taxable.
