Here are a few facts to help you anticipate and evaluate the future tax effects of decisions you make today. Ordinary income tax rates apply if assets are held for less than 12 months. These investments will be treated as though they were acquired in 2001, making them eligible for the reduced tax rate if held for another five years. This would be advantageous for securities that have not appreciated substantially by then, but will be expected to do so over the following five years. Under prior law, taxpayers could postpone the tax on the gain from the sale of a principal residence, provided that the taxpayer purchased a more expensive replacement residence.
Today there is no rollover requirement and no age limit.
However, in order to qualify, the home must have been used as the taxpayer's principal residence for at least two of the five years preceding the sale. To qualify, children must be under 17 years of age. This benefit is phased out as the level of income increases. For many individuals, higher education is a concern and there are a number of new provisions to help taxpayers in this area. Unlike the Hope Scholarship Credit, the Lifetime Learning Credit may be claimed for an unlimited number of years.