The Federal Tax Code allows married taxpayers to exclude from capital gains taxes up to $500,000 in profits from selling a home (singles can exclude $250,000). In order to qualify for this exemption, you must prove that that the home has been your principal residence for at least two out of the last five years. The establishment of the home as a principal residence depends on the facts of each homeowner's circumstance. Here are two cases to consider.

Homeowner A has lived at 25 Pine Drive for 12 years. Although he stays at his vacation cottage in another town for up to three months out of each year (sometimes more), 25 Pine Drive is his principal residence, where he lives most of the time. When he sells the home, Homeowner A (filing as a single individual) can keep up to $250,000 in tax-free profit.

Homeowner B buys 108 Maple Street, intending to live there. He rents it out while waiting to sell his current home, where he has lived for six years. His principal residence sells at the end of two years. Homeowner B moves into his new house, lives there for three months, and then decides to travel. After a six-month trip, he regrets buying 108 Maple Street and sells it. Even though he has owned the house on Maple Street for over two years, it won't qualify as "owner-occupied", because he only lived in it for a few months. Thus Homeowner B is not eligible to claim the tax exemption when he sells the house on Maple Street.

Consult your tax advisor for advice about your particular circumstance.

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Hi, my name is Dan DeYonker with RE/MAX First. Welcome to Macomb, Wayne and Oakland counties in the beautiful state of Michigan. I am a full time realtor and an industry leader in South Eastern Michigan! I specialize in existing home sales, new construction, vacant land and commercial properties. I have been a full time professional since 1994. I am proud to rank among the top 1% of all realtors nationwide. My philosophy is to treat all of my clients how I would want to be treated. I want to share with you my expert knowledge and experience. Please use my site to provide yourself with up to date information about Macomb, Oakland, Wayne and St. Clair counties in SE Michigan, and Metro-Detroit. If your looking to buy or sell a home in these areas or you are relocating across town, in or out of the state, the U.S., or the world you can call Dan "Your Real Estate Man" Toll free at 1-877-557-1234.

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