Is there still an over-55 home sale exemption?

No. The one-time $125,000 exclusion for sellers 55 and older ended in 1997. It was replaced by the exclusion we have today: up to $250,000 of gain, or $500,000 for a married couple filing jointly, available at any age.

Many homeowners still plan around the old rule, because it's what their parents used. Here's what changed.

The old rules

Before 1997, sellers 55 and older could exclude up to $125,000 of gain on the sale of their home, once in their lifetime. Sellers of any age could also defer the tax by buying a replacement home that cost at least as much as the one they sold.

The current rule

The Taxpayer Relief Act of 1997 replaced both with a single exclusion:

• Up to $250,000 of gain for a single filer, or $500,000 for a married couple filing jointly.
• The home must have been your primary residence for at least two of the last five years.
• Age doesn't matter, and you can use it again, generally once every two years.
• Buying a replacement home is no longer required or relevant to the tax.

Why it matters now

The $250,000 and $500,000 limits haven't changed since 1997. Home values in Northern Virginia have. An owner who bought decades ago can have a gain well above the exclusion, and turning 55 or 65 doesn't add anything to it.

Records help. Documented improvements reduce your gain. Will I owe capital gains tax when I sell my house? walks through the calculation with an example.

This is general information, not tax advice. Confirm how the rules apply to you with your tax adviser.

For more on planning a move around retirement, see how I approach retirement.

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