This part of the act allows the taxpayer to exclude up to $250,000 of gain ($500,000 for married couples filing a joint return) realized on the sale or exchange of a principal residence. The Act applies to any sale or exchange that occurs after May 6, 1997. To be eligible, the residence must have been owned and used as the taxpayer's principal residence for a combined period of at least 2 years out of the 5 years prior to the sale of exchange. The prior law permitted a "Once in a Lifetime" exclusion of $125,000 of gain. Unlike the prior law, this exclusion will apply each time the taxpayer sells or exchanges a principal residence, although the exclusion may not be claimed more frequently than every two years. Also, unlike the prior law, the taxpayer is not required to acquire a replacement principal residence to claim the exclusion.
If I take the exclusion of capital gain tax on the sale of my old home this year, can I also take the exclusion again if I sell my new home in the future? There is no limit on the number of times you can exclude the gain on the sale of your principle residence so long as you meet the ownership and use tests.