As promissed, here are some additional summaries of year-end tax law changes:
- A $250,000 gain exclusion applies for sales of a principal residence - $500,000 can be excluded for married couples. Since the $500,000 exclusion requires a joint return, if one spouse died and the house was sold in a later tax year, the surviving spouse could only use his or her $250,000 exclusion. Now, for sales after 12/31/07, a surviving spouse can obtain the full $500,000 exclusion if the exclusion requirements were met immediately before the spouse's death, and the surviving spouse does not remarry before the sale, and the house is sold within 2 years of the first spouse's death.
- For 2007, qualified mortgage insurance premiums are deductible as if they are home mortgage interest. This provision has now been extended through 2010. Note that the deduction is phased out at higher levels of adjusted gross income.