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Homeowners are winners under the Taxpayer Relief Act of 1997. Under the new law, up to $250,000 ($500,000 for a married couple filing a joint return) of gain realized on the sale or exchange of a principal residence is not taxable not just deferred. In addition, the new law reduced the capital gains tax rate. Any gain from your home sale in excess of $250,000/$500,000 is taxed at the new lower rate.
Homeowners qualify for this tax exclusion if two requirements are met:

The home must be used as a principal residence for two of the preceding five years. This law does not apply to vacation or second-home properties. There are some exceptions for those who cannot satisfy the two-year use requirement.
No more than one sale or exchange can take place every two years.

If you are selling your home, you should contact a tax advisor for details on how this new law applies to your sale.

See also:
Home Buyers Guide
Affordability Guide
Mortgage Calculator



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