Mortgage guru Dan Green reminded us a couple of weeks ago that the newly passed Housing and Economic Recovery Act of 2008 is not all just “fun and games”. Aside from the obvious goodies such as the first-time home buyer credit of $7,500 and conforming loan limit increases in high-cost areas, there is a new provision that will change the way capital gains on home sales are going to be taxed (yep, for some of you home sellers, your cheese will be moved).

Thus far, the capital gains exclusion rule has been: If you’ve lived at your principal residence for two consecutive years within the last 5 years, you would not incur any capital gains taxes if your gains didn’t exceed $250,000 (single households) or $500,000 (married, filing jointly). Starting January 1, 2009, the formula for calculating your capital gains tax liability will change to account for a home’s actual usage as a primary residence over its qualified life. Head on over to Dan’s blog where he will provide you with the new formula and with an example of how the new rule might affect your pocket books.

Obviously, in Edgebrook and Sauganash we have a vast amount of relatively high-value properties, so this change might be of interest to you, and possibly even affect you. If you are selling your home before the end of this year, you are exempt from the new capital gains exclusion rule.

This post is not meant to be tax advice, so if you feel that you might be impacted by the new tax rule, please consult with a tax professional.