Clients often ask about the new tax laws regarding the sale of their property, and of course, I send them to their CPA or tax advisor, but here are some general rules.
The best tax shelter available to home sellers comes from the Taxpayer Relief Act of 1997, which allows married taxpayers to keep up to $500,000 profit ($250,000 for individuals) tax-free when they sell their principal residence. The "two out of the last five years" provision still applies, but as long as you've lived in the house for those two years, you can use this exclusion over and over.
Remember, the taxable capital gain is reduced by the amount of your selling costs...such as sales commissions, title insurance, and inspection fees. Any decorating, repairs and maintenance work completed within 90 days of the sale are also considered selling costs.
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