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REAL ESTATE TIPS |
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The Taxpayer Relief Act The 1997 federal budget made significant changes that benefit real estate. The capital gains tax exclusions on the sale of a principal residence is just one of several benefits for homeowners. The new tax law grants married couples up to $500,000 (singles $250,000) capital gains tax exclusion for the sale of their principal residence if they have resided in the home for two of the last five years. For assets sold after May 6, 1997, any profits in excess of the $500,000 (or $250,000 for singles) will be taxed at the new lower capital gains tax rate of 20% for those in the upper income bracket and 10% for those in lower tax brackets. The overall capital gains rates will go lower still in the year 2001, when the rate for the upper income bracket will drop to 18% and 8% for those in lower income tax brackets. This will be applicable for assets purchased December 31, 2000, and held five years or more. The rollover provision in effect prior to the 1997 bill that allowed an individual to avoid capital gains taxes by purchasing a home of equal or greater value was repealed in favor of the new exclusion and is no longer effective. Consult your tax advisor for your particular circumstance. |