Submitted by M. Barrick, Jul 31, 2008 10:19

The new homeowners bail out bill is going to affect the tax break you would get on a second home that you later move into as a primary residence (which many second home buyers do). Before this bill, in order to take the tax deduction there was one main requirement. You must own and live in the property as your main residence for two of the five years before you sell it. Now, however, when you sell such homes on or after January 1, 2009, you will have to factor out the periods the residence was a second home and pay taxes on that portion of the profit. So if I have a property I use as a second home for five years that I move into as a primary residence for the next five years, when I go to sell 50% of the profit of that home will be taxable. The rest, up to $500,000 will not be. This is a little known provision in this bill and should make for interesting conversation at the accountant's office come tax time.

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