TAX RELIEF Prepared by Gloria Brda The Taxpayer Relief Act of 1997 signed on August 5, 1997, allowed for married taxpayers to exclude from capital gains taxes up to $500,000 in gain from selling a home. Single people can exclude $250,000 in taxable gain. This exclusion replaces both the one-time $125,000 tax exclusion available for taxpayers over 55 years of age, and the deferral of capital gains when purchasing a more expensive home. This change exempts over 99 percent of home sales from capital gains taxes and dramatically simplifies taxes and record keeping for over 60 million homeowners. Taxpayers can use this exclusion every two years. The new law allows capital gain exclusions whether you "buy up" to a more expensive dwelling or "buy down" to a less expensive home. If you have a gain above the limit, it will be taxed at the new 20% capital gains rate, down from the current 28% rate. Beginning in 2001, the capital gains rate drops to 18% for taxable gains on a principal residence that you have occupied for at least five years. Homeowners can now consider several new options. Many people find themselves at an empty-nester stage (no children at home) in a four or five bedroom home with a large equity buildup. For many of these people, their home has been their major investment and this new law will allow them to unlock the equity-earlier. They may help their children buy a first home, purchase that vacation dream home, or make other investments for retirement. Consult your tax advisor for your particular circumstance! [ Back to Gloria's Library of Helpful Articles ] Gloria Brda, Realtor Associate® RE/MAX CENTER 100 N. Atkinson Road, Suite 106 Grayslake, Illinois 60030 Toll Free: 800.257.REMAX Office: 847.223.7878 x3021 Fax: 847.223.1703 www.gloriabrda.com Real Estate in Northern Illinois ©1999-2007 Gloria Brda