The tax-free sale of your residence provides a major tax break under both federal and state tax laws. Federal tax law permits taxpayers to avoid taxes on up to $500,000 in gain. Pennsylvania tax laws do even better. They provide no limit on tax-free gain.
To qualify for the exemptions under both sets of laws, the home must have been owned and occupied as a primary residence for a total of at least two of the previous five years. However, the two-year period does not have to be continuous. Also, a taxpayer who takes this exclusion cannot take it again for two years.
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