How Do You Spell Tax Relief?

The Taxpayer Relief Act of 1997 was the answer for permanent relief from income taxes on the sale of a principal residence.

The rules are simple — if you sell your home and the gain on the sale is $250,000 or less ($500,000 on a joint income tax return), there’s no tax due when you sell it. As a matter of fact, in most cases you won’t even need to report the sale on your tax return.

Even if you and your spouse are separated when the sale takes place, it is likely you’ll both qualify for tax relief. Your home will be considered the principal residence of both even if only one spouse is living there, as long as there is a court order or written agreement granting the resident spouse use of the home.

The old rollover rules are gone. You no longer have to purchase a new home to escape tax on the gain on your home sale.

The old rules for the “over 55″ exclusion are gone as well. Regardless of your age, you can exclude $250,000 of gain, or $500,000 if you are married and filing a joint tax return, as long as you’ve lived in the house at least two of the five years prior to sale. And you can take advantage of this exclusion time and time again, no matter how many houses you own in the future, as long as your home sales are at least two years apart.

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