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Tax Relief
The Taxpayer Relief Act of 1997 signed on August 5, 1997, allows married taxpayers to exclude from capital gains taxes up to $500,000 in gains from selling a home (singles could exclude $250,000). This exclusion replaces both the one-time $125,000 tax exclusion available for taxpayers over age 55 and the deferral of capital gains when purchasing a more expensive home. This change exempts over 99 percent of homes sales from capital gains taxes and dramatically simplifies taxes and record-keeping for over 60 million homeowners. Taxpayers can use this exclusion every two years.

The new law allows capital gain exclusions whether you "buy up" to a more expensive home or "buy down" to a less expensive one.

Homeowners can now consider several new options. Many people find themselves at an empty-nester stage (no children at home) in a four or five bedroom home with a large equity. For many of these people, their home has been their major investment and this new law will allow them to unlock the equity. They may help their children buy a first home, purchase that vacation dream-home or make other investments for retirement.

Consult your tax advisor for your particular circumstance.

 
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