The Housing Stimulus Bill of 2008 has provision that modifies the $250,000/$500,000 exclusion of gain on the sale of a principal residence. Beginning in January 1, 2009, the exclusion, as it applies to a second home (or rental property) that is converted to a principal residence will be allocated. When the second home is sold, any gain attributable to use as a second home (or rental property) will be taxed at capital gains rates. Any gain attributable to use as a principal residence will remain excludable, up to the $250,000 and $500,000 limits. A formula is provided for computing the proper treatment of these gains; consult with your tax advisor.
Also, the maximum “conforming” loan amount dropped yesterday from $729,750 to $625,500.
Today the Dow closed above 9000, the best close in two months. Some analysts say “As January goes, so goes the rest of the year”. Here’s hoping the financial markets will continue stronger this year and consumers will regain confidence in spite of expected continued unemployment increases.