Posted on October 27, 2005 at 16:54:12:
The good news is that you can exclude as much as $500,000 of capital gain (for a couple filing jointly) before figuring taxes on the sale of your primary residence, as long as you have lived there for two of the past five. Even better: given enough time and enough houses, you can get this windfall again and again.
You don’t even have to be married to take this tax-free bonanza. An unmarried couple who sells a house, meeting the same rules, can each take home as much as $250,000 profit.
More goodies: If you happen to move because of “unforeseen circumstances,” like a divorce or a new job, before you qualify for the full exemption, you can get a partial exclusion of a gain.
Also, you can add the cost of the capital improvements to your basis—the cost of the house—before figuring your gain.
If you want to turn a vacation home into a primary residence, be sure your driver’s license and your voting records reflect this.