Q. In a recent article (Savvy move: Sidestep the new tax pitfall for home sales) you said I would not qualify for the home sale exclusion if I move to my vacation home. Will I qualify if I move to a home I don’t currently own? M.F., Rockville Centre, N.Y.
A. Don’t confuse things. Converting a vacation home to a principal residence doesn’t affect the home-sale exclusion for your current principal residence. Assuming you meet all the requirements, you can exclude tax on up to $250,000 of gain from the sale of your old home ($500,000 for joint filers), regardless of where you move.
However, if you subsequently sell a converted vacation home, any gain attributable to nonqualified use after 2009 is taxable.
Tip: If you’re planning to reside in a converted vacation home for a while, the eventual tax impact may be minimal.