Do You Know About the Taxpayer Relief Act of 1997 When Selling Your Home?
I was recently at a listing appointment with an older gentleman whose wife had passed not too long ago. The home was just too big for him and it was time for him to move on. He bought the home in the 1980’s and had since paid it off.
As we were chatting, he was concerned about the capital gains he would be faced with when he sold his home. I told him that he should qualify for the Taxpayer Relief Act of 1997. Funny – he knew nothing of it.
I explained that the Relief Act allows sellers to sell their property as long as they have lived there for 2 of the last 5 years and take advantage of this tax relief. For single individuals, they can realize up to $250,000 in capital gains TAX FREE. For married couples, it is $500,000.
There is no requirement to roll these proceeds over to a replacement home, so a seller can take this money and go on a cruise around the world if they so desire.
Additionally, there is no limit to the number of times you can use this exemption. You just need to make sure you have lived in the home as your primary residence for two of the past five years. This exemption does not apply to investment or vacation homes.
So let’s go back to my older seller whom I met with this week. Does he get to take the $500k tax relief exemption or is he limited to only $250k since his wife passed? The answer is pretty straightforward. The unmarried widow or widower has up to two years after the death of their spouse to sell their home and take advantage of the $500k tax exemption.
Before listing your home for sale, consult with your CPA or attorney to make sure these exemptions apply to your situation. This is serious money and requires expert advice!