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Tax Relief For Your Primary Residence


"The Taxpayer Relief Act of 1997" was signed into law by President Clinton on August 5, 1997. This was the first major piece of tax legislation since the Tax Reform Act of 1986. For taxpayers owning a principal residence, the rollover rules and once in a lifetime exclusion rules have been replaced with new, and in most cases, more liberal rules for the treatment of a gain on the sale of a principal residence.

In the following paragraphs there is a brief outline of the new capital gains law and new rules for treatment of gain from the sale of a principal residence.

Reduced Capital Gains Rates:

For individuals, with net capital gain from sales or exchanges occurring after May 6, 1997, the maximum rate will be:

  1. * For property held more than 12 months, the sale of which occurred after May 6, 1997 and before July 29, 1997, the maximum rate of 20% will apply (10% for taxpayers in the 15% bracket);
  2. * For property held more than 18 months, the sale of which occurs after May 6, 1997, the maximum rate of 20% will apply (10% for taxpayers in the 15% bracket);
  3. * For property acquired after December 31, 2000 and held more than 5 years, prior to its sale, the maximum rate of 18% will apply (8% for taxpayers in the 15% bracket);
  4. * For property owned on December 31, 2000, a taxpayer may elect to be treated as a taxpayer who acquired property after December 31, 2000 for the purposes of the 5 year rule and the 18% rate (8% for taxpayers in the 15% bracket);
  5. * All depreciation taken on real estate shall be recaptured at the rate of 25%, in other words, for any real estate for which depreciation was taken (allowed or allowable), the amount of the gain attributable to depreciation will be taxed at 25% and the amount of the gain attributable to appreciation shall be taxed at either 20% or 18% as described above;
  6. * For sales before May 7, 1997 (no matter how long the property was held) and sales after July 28, 1997 (property held more than 12 months but not more than 18 months), the current 28% maximum rate will continue to apply.


Contact Us www.julieparrishrealty.com
919.489.9694 229 Forestwood Dr. Durham, NC. 27707