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FYI

Homeowners in Military Winning Capital-Gains Relief

(April 8) -- Both the Senate and the House have passed versions of the Armed Forces Tax Fairness Act, which will allow active-duty service personnel stationed away from their homes to qualify for the capital gains exemption when they sell. An oversight in the Congressional reform of the home-sale capital-gains rules in 1997 has placed a higher tax burden on these homeowners.

Homeowners can exclude sale profits of as much as $250,000 or $500,000, depending on their marital status, as long as they have lived in the home for two of the last five years. However, since members of the armed forces are often away from their homes for long periods of time, they have been forced to pay hundreds of thousands of dollars in federal and state capital gains taxes.

The law should save military homeowners about $23 million annually over the next 10 years. The legislation would suspend overseas military service from the capital gains two-out-of-five-year test. The suspension can last up to five years in the House version and as many as 10 years in the Senate's bill; military personnel must be gone more than 180 days and stationed 150 miles or more from home to qualify for the suspension under the House bill, while the Senate version requires them to be stationed just 50 miles from home for more than 90 days.

Source: Baltimore Sun (04/06/03); Harney, Kenneth