Housing Bill Changes Tax Law on Profits from Sale of Second Home -BYLN-

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WASHINGTON u Deep in the nearly 700 pages of the new housing bill just signed into law is a complicated tax code change that could affect substantial numbers of people who purchase second homes or rental investment real estate in the coming decade with an eye to occupying them as their main residence later.

The bill narrows the use of the codeEs tax-free exclusion that allows sellers of principal residences to escape taxation on the first $500,000 of their profits (married joint-filers) or $250,000 (single-filers). Under current law, sellers can claim the full exclusion if they have used a property as their principal residence for at least two of the five years preceding a sale.

They can also claim the exclusion even if they convert an investment …