Over-55 Home Sale Exemption
Candlefocus EditorUnder the over-55 home sale exemption, homeowners aged 55 and older could pursue a one-time exclusion of up to $125,000 of the total capital gain on their home sale, or a maximum of $250,000 on a combined return if filed jointly with a spouse. This exclusion was applicable only to home sales that took place after December 31, 1974, and before the enactment of the 1997 Taxpayer Relief Act. It also only applied if the seller, or at least one title holder, was 55 or older on the day of the sale.
The over-55 home sale exemption was replaced with a new law following the passage of the Taxpayer Relief Act of 1997. Now, regardless of age, all homeowners can claim an exclusion of a certain amount on the sale of their primary residences. This exclusion is equal to $250,000 per taxpayer or $500,000 on a joint return filed by a married couple. However, it should be noted that this new exclusion only applies to taxpayers who have owned and used the same home as their primary residence for at least two out of the five years immediately preceding the sale.
In summary, the over-55 home sale exemption was a tax law that provided individuals over the age of 55 with the opportunity to exclude a portion of their capital gains from taxation when selling their home. Following the passage of the Taxpayer Relief Act of 1997, the exemption was replaced and now all homeowners, regardless of age, are eligible for an exclusion of $250,000 per taxpayer or $500,000 on a joint return. This new exclusion can only be claimed if the homeowner has used the same home as their primary residence for at least two out of the five years immediately preceding the sale.