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The Exclusion of Capital Gains for Owner-Occupied Housing Updated February 2, 2022 Congressional Research Service https://crsreports.congress.gov RL32978 Congressional Research Service SUMMARY The Exclusion of Capital Gains for Owner-Occupied Housing For 70 years, capital gains on sales of taxpayers’ homes have been preferentially treated. A revision in 1997 replaced two longstanding provisions—a provision allowing uncapped capital gains tax deferral (i.e., a rollover) when a new residence was purchased and a provision allowing a one-time exclusion of $125,000 for sellers over aged 55—with a capped exclusion for each sale. Although the cap adopted in 1997 was higher than the cap for the over-aged-55 sellers, it was less generous than the uncapped rollover provision. In addition, the dollar cap was not indexed for price changes, and, unlike the previous over-aged-55 cap, was half as large for unmarried taxpayers—$500,000 for married couples and $250,000 for single taxpayers. Two factors...