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Tax Tidbit 10/15/08: Exclusion on Gain of Sale of Personal Residence New Rules

Currently, an individual can exclude up to $250,000 ($500,000, if they are married filing jointly) of the gain from the sale of their principal residence, provided that the individual owned and occupied that home as their principal residence for 2 of the 5 years prior to the sale.  However, the American Housing Rescue and Foreclosure Prevention Act of 2008 have changed those rules.

The rules will only change for home sales after 12/31/08, and for "non-qualifying use" of the home after 12/31/08.  Non-qualifying use of the home is when the home is not held as a principal residence.  The total gain is allocated between periods of non-qualified and qualified use, based on the respective amounts of time the property is utilized. Non-qualified use only counts prior to the home being used as a principal residence.  Therefore, if a principal residence (held for the required period of time) is converted to a rental property, that period of rental is not considered to be non-qualifying use.

For more information and explaination regarding the changed rules on these sale exclusions, please contact Bedard, Kurowicki & Co.,CPA's,PC for more information at (908) 782-7900, info@bkc-cpa.com or visit www.bkc-cpa.com.