Q: We sold our home in 1995 and took advantage of the full $125,000 home-sale gain exclusion available at that time. Now, we're looking to sell both our main Connecticut home and our winter home in Florida. Can we benefit from the home-sale exclusion again for either (or both) of these houses? H.R., New Canaan, Conn.
A: You definitely can for the Connecticut house, and possibly for the Florida house if you move south for two years. Here's the deal: Even if you claimed the $125,000 home-sale exclusion that was available before May 7, 1997, you can still use the "new and improved" home-sale exclusion. It allows joint filers to avoid tax on up to $500,000 of home-sale gain on their principal residence. To qualify, you must live in that home for at least two of the five years prior to the sale. The problem for you: The gain exclusion is not available for second homes. One good option: If you sell your main house and move into your Florida home for at least two years, it will become your "principal" residence. Then, you can sell it and, again, take advantage of the $500,000 gain exclusion.
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