A married couple filing jointly gets a tax exclusion on up to $500,000 of profit when they sell their primary residence - a house they've owned and lived in for two of the five years before the sale. A single taxpayer gets a tax exclusion on up to $250,000 of profit. Until 2008, a surviving spouse had to file a joint tax return for the year of the sale to claim a $500,000 tax exclusion. In practical terms, this meant the survivor had to sell the house by Dec. 31 of the year of his or her spouse's death

EXAMPLE: Joe Homeowner, who died in May. His widow, Jane, can file a joint tax return for 2007 because she was married for part of that year. Under the old rules, she'd have to sell their house by December 2007 to claim a $500,000 tax exclusion. But as of January 1, 2008 Jane is eligible for a $500,000 exclusion for two years after her husband's death - provided she doesn't remarry before she sells the house. If he died in May 2007, she has until May 2009 to sell the house and claim a $500,000 exclusion.

But what if Jane does remarry before selling the house? First, the exclusion she had with Joe will expire. Then, as a married couple, she and her new husband - we'll call him Fred - can file a joint tax return. But they can't claim a $500,000 tax break on the sale of the house until Fred has lived there for at least two years. Only one spouse (in this case, Jane) needs to have owned the house for two of five years before the sale to qualify for a $500,000 exclusion, says Michael W. Alderman, an East Meadow tax accountant. But both spouses must have lived there for at least two years. The law doesn't require that Jane and Fred be married during those two years or even at the time of the sale, Alderman adds. They can live together for two years, sell the house, then get married - and qualify for a $500,000 tax exclusion if they file a joint return for the year of the sale.