Liz Frazier Peck , Dec 13, 2017

As the House and Senate attempt to merge their tax overhaul bills into one cohesive plan, there has been extensive coverage on how tax reform may affect home owners. Primary coverage has focused on two areas: mortgage interest and property tax deduction amounts. What you may not have heard as much about is the potential change to the home sale exclusion. For anyone looking to sell their home, this could add a significant cost and must be factored into your decision.

Current home sale exclusion
Thanks to the Taxpayer Relief Act of 1997, currently if you have lived in and owned your house at least two of the five years, you can exclude up to $250,000 ($500,000 for married taxpayers) in capital gains from the sale of your home. This exclusion is available to taxpayers for one sale every two years. This is a major break for homeowners; our homes are usually our most valuable asset and it protects a major chunk from taxes.

Proposed home sale exclusion
Both the House and Senate bills include an increase in the amount of time the homeowner needs to live in their home. The proposal increases the timing for home sale exclusion from two out of five years to five out of eight years. The bill also would limit use of the tax-free exclusion to once every five years, up from the current two years.

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