Capital Gains

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	Capital Gains Tax Rules

		How will you be affected by the real estate aspects of the 1997 tax law changes? (The most recent tax code)

		This legislation completely replaces the "rollover" deferral of tax liability on home-sale profits. It also terminates the $125,000, one-time, tax-free "exclusion" on profits for home sellers 55 years or older.


	Tax Law Changes


	The legislation allows the majority of taxpayers who sell their principal residences (provided they used the property as their principal residence for two of the prior five years) on or after May 7, 1997, to escape federal capital gains taxes on their profits.


	Married home sellers, filing jointly, will be able to take up to $500,000 in home-sale gains, tax-free, provided they use the property as their principal residence in two of the prior five years. Taxpayers who file singly will be able to take up to $250,000 of gain without capital-gains taxation.


	*What about seniors who have already used their "one-time $125,000 exclusion"?*


	They too will be free to make full use of the new law, provided they meet the two-year principal residence test.


	*What about capital losses on home sales?*


	Unfortunately, the new law provides no relief for sellers who suffer a net loss on the sale of their principal residence.


	There is now penalty-free use of up to $10,000 from IRAs for down payments. These funds can come from an IRA owned by the buyer, or their children, or grandparents.


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