If you sold a home in 2005

Washington-



Most sellers can cash in one of the biggest perks in the tax code. Couples can sell their home for a $500,000 profit without paying a cent of income tax. Single taxpayers can pocket $250,000.



To qualify, the house must be your principal home for two of the past five years -- and even then there's flexibility because those periods don't have to be continuous and there are numerous hardship exceptions.



If your gain is over the exclusion amount, hunt for expenses such as the cost of home improvements, real estate commissions and title insurance that can pad your "tax basis." Every $1,000 you track down will save nearly $250 in federal and state taxes.


Tax trap: The rules changed dramatically in mid-1997. Until then, homeowners could defer tax on their gain by rolling it into the purchase of a more expensive house. If you traded up before the rules changed, you must count that deferred gain against your $250,000 to $500,000 exclusion.



You can pluck the deferred gain from Form 2119, attached to your tax return for the year you sold the previous home. But it will be difficult to remember -- let along prove -- what costs you incurred in your current home if you don't save receipts and records.



In that case, "go back down memory lane and look at old photos," said Daniel D. Morris, a tax partner with Morris + D'Angelo in San Jose. The goal is to find evidence of kitchen remodeling, landscaping and other improvements