Effective January 1, 2009 New Rules for Taxing Gain:
2008 Housing and Economic Recovery Act (HERA) Exclusion Changes
The 2008 Housing and Economic Recovery Act (HERA), H.R. 3221, included a provision that modifies the application of the $250,000/ $500,000 exclusion, but ONLY in situations in which an individual who owns a second home or rental home converts it to use it as his/her principal residence. When the former second/rental home is sold, some portion of the gain may be taxable, even when the owner has lived in the home for the required two of the previous five years. Affected second/rental homes are any residences the individual owns that are not used as a principal residence.
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