Friday, December 28, 2007

Capital Gains rule changed for married joint-filers

Most homeowners know that you can claim capital gains tax-free of up to $250,000 for single-filers and up to $500,000 for married joint-filers, so long as you have occupied your home for any of two of the last five years. But when a married homeowner dies and leaves his/her spouse with the house, what the IRS has been "enforcing" until now has not exactly been fair or easy to deal with, especially in the midst of a grieving period.

With Congress' final tax bill of 2007 being passed, this has been changed for the benefit of the surviving spouses. They now have up to two years to claim the full $500,000 exemption.

Prior to this bill, the spouse could only claim the full $500,000 gain in the year that a joint return was filed. So the property would have to be sold by the end of that calendar year in which the the death occurred, and if it happened late in the year that would make for a difficult haste to get the house sold. Not something likely to be high on the priority list of a grieving spouse.

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