This bit of information is welcome news to Seniors and anyone dealing with the loss of a spouse (see below):
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(Note: The following article is from Daoro, Zydel & Holland, CPAs and consultants, San Francisco.)
Before a change in the law late in 2007, an exclusion of up to $500,000 of gain on the sale of a principal residence was available only to taxpayers who filed a joint return and met certain other tests.
Those tests included:
- At least one of the spouses owned the home for two of the last five years;
- Both spouses used the home as a principal residence for two of the last five years;
- Neither was ineligible for the full exclusion because of the limit on using the exclusion once every two years; and
- If one spouse died, the sale of the house must have taken place in the year of death to get the full benefit.
Under the change in the law, effective in 2008, the surviving spouse now may use the full $500,000 exclusion as long as the sale occurs not later than two years after the date of death of the other spouse. This is valid provided the other tests previously mentioned were met immediately before the spouse’s death. In addition, the surviving spouse cannot remarry until after the sale of the house.
