Alan Moore / L’Observateur / December 20, 2000

Selling one’s residence and moving into a smaller home or condo is seldom an easy decision, but at least part of the decision-making process is a little easier in light of an exclusion (part of the Taxpayer Relief Act of 1997) that eliminates most people’

Under these rules, which apply to sales and exchanges of a principal residence after May 6, 1997, up to $250,000 of the gain from the sale of a single person’s principal residence is tax-free. For certain married couples filing a joint return, the amount

Like most tax laws, however, the exclusion has a detailed set of rules for qualification. Besides the $250,000/$500,000 dollar limitation described above, the seller must have owned and used the home as his principal residence for at least two years out o

These rules can get pretty complicated if you marry someone who has recently used the exclusion provision, if the residence was part of a divorce settlement, if you inherited the residence from your spouse, if you sell a remainder interest in your home, o

Not everyone will be happy with this exclusion. Homeowners who sell at a loss will still not be able to claim a deduction. Also, homeowners with profits exceeding the $250,000/$500,000 limits may have to pay more taxes under these rules since Congress rep

On balance, though, the exclusion benefits most taxpayers. We finally have a tax break that most of us can actually use, and the tax savings can be substantial.

Alan S. Moore is a Financial Advisor in the Mandeville office of Legg Mason Wood Walker, Inc., a diversified securities brokerage and financial services firm that is a member of the New York Stock Exchange, Inc. and SIPC.

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