Magazine article Newsweek

Still a Haven, Just Not A Tax Haven

Magazine article Newsweek

Still a Haven, Just Not A Tax Haven

Article excerpt

Byline: Linda Stern

Vacation-home owners are about to lose a sizable tax break. Until now, they could move to their retreat, live in it for two years, then sell and take full advantage of the capital-gains exclusion of up to $500,000 per couple ($250,000 for singles) that applies to primary homes. But Washington closed that loophole in the housing-relief legislation that passed this summer.

Under the new rules, that exclusion will be prorated by the amount of time the owner actually used the home as a primary residence. So if you owned the home for 10 years, but lived in it only the last two, you'd be able to exclude 20 percent of the gain.

The good news is that lawmakers made Jan. 1, 2009, the starting date for this calculation. So longtime homeowners won't have to worry about all the years they enjoyed before that date. Someone who bought a beach house in 2000, for example, moves into it on Jan. …

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