Best Tax Tips

The home sale exclusion is one of the most popular tax breaks in the Tax Code. A married couple filing jointly can generally exclude up to $500,000 in gain (single individuals up to $250,000). Before the new law, if a second home becomes a principal residence, after two years the owner could sell it and exclude up to $250,000 in gain from their income or up to $500,000 for couples filing jointly. The housing act closes what some call a “loop hole.” The new law pro-rates the exclusion between the time that a home is used as a principal residence and the total length of ownership, which includes any “non-qualifying” use as a rental or vacation property. As good news to those who have already owned property for a while and have seen it appreciate, non-qualifying use before the January 1, 2009 effective date of the provision is not used in the calculation; neither are periods after a qualified use of the property or temporary absences of less than two years.