The new federal housing law nips a popular tax strategy in the bud. Previously, you could avoid tax on the sale of a vacation home “converted” into a principal residence. But starting in 2009, nonqualified use counts against you for sales after 2008.
Strategy: Move—literally—before the end of the year. That way, you can still max out on the home-sale exclusion.
The exclusion covers the tax on the first $500,000 of gain ($250,000 for single filers) from the sale of a home used as your principal residence for at least two out of five years prior to the sale. Thus, if you move to your vacation home full time in December and sell anytime after 2010, the full $250,000 or $500,000 exclusion applies.
- Small Business Tax Deduction Strategies No matches