Second Homes 411

Legislation changes to capital-gains tax rules associated with second homes as a means of generating revenue to pay for the tax incentive for cash-strapped homeowners, raising about $2 billion over a decade. Second homes currently are deemed principal residences for the purposes of capital-gains tax exemptions if they are used as such for two out of the last five years, but the bill takes into consideration the total years of ownership and bases the exemption on how much time a property was used as a primary residence. The measure has received support from the Mortgage Bankers Association and the National Association of Realtors, although neither group wants second homes to be subject to more stringent rules. However, NAR tax counsel Linda Goold notes, “A tax benefit has been curtailed, but nothing has been eliminated.”