The bill actually may not have the broad impact originally thought. Keep in mind that the old law allowed for an investor to buy a property and rent it out and as long as they moved into that investment rental or second home and claimed it as their primary for 2 years – they would qualify for the $250,000/$500,000 capital gains exclusion. That ability may have gone away.

If you originally lived in the property and it then became a rental, the old $250/$500 rule still may apply. Kathleen Pender of the San Francisco Chronicle, outlines this nicely under the Vacation Homes section of her write up.

From my perspective – this is better than I thought. But I still don’t like it. Why are we discouraging from profitable investment? If an investor is willing to move into the property for two years, it’s clearly not a flip and get-rich-quick scheme. Investing helps to fuel the real estate market and the economy. I still don’t see the housing relief in this.

And – oh yeah – can we make this more complicated?

Shameless disclaimer – Please know that I’m not an expert in taxes. You should discuss these questions with your professional Accountant or CPA.