How does the 1997 Tax Bill affect you as a home owner?

• Age 55 (or any other age) is no longer a requirement for qualification to avoid substantial capital gains tax when you sell your home.
  
• A single person or couples filing separately can each realize up to $250,000 of gain, tax -free.
• A married couple can realize up to $500,000 of gain, tax-free.
  
• Sellers can take advantage of the $250,000 or $500,000 tax exclusion every two years as long as it has been the principal residence during the two-year period.
  
• The home must have been sold after May 6,1997, and it must have been the seller's principal residence for at least 2 of the last 5 years.
  

Example: Assume the sellers are a married couple (filing jointly), and their net gain is $580,000. They realize the first $500,000 tax-free and they pay 20% tax on the difference (20% of $80,000 is $16,000).

Under the old tax law, a taxpayer over age 55, in the previous example would have been allowed to defer (one time only) a total gain of $125,000, and then only as long as they bought a house of equal or greater value. Under the old tax law they would have been taxed at a 28% rate (28% of $455,000 would have been $127,400).

If an over-55 seller already took advantage of the old tax law, he/she can take full advantage of the new tax law for current or future property as long as the property has been their personal residence for at least 2 of the previous 5 years.

Effective in 1998, first-time home buyers have the right to use up to $10,000 of their IRA money as down payment to buy a first home and not suffer the penalties of early withdrawal.

Also, parents, children and other family members can defer the penalties if they withdraw from their IRA to contribute to the purchase of this first home. The total withdrawals, however, from any number of IRA's cannot exceed $10,000. It's also important to note that, although the penalties are waived, the taxes on the withdrawn IRA money are not waived.

You can find more information about these tax advantages by going to the IRS Internet site at: www.irs.ustreas.gov.