The over-55 home sale exemption is an obsolete tax law that provided over the age of 55 with a one-time exclusion. Individuals who met the necessary requirements could exclude up to $125,000 of capital gains on the sale of their personal residences. The exclusion was intended to stimulate the market and reward homeowners for their purchase and subsequent sale.
The over-55 home sale was superceded by provisions in the 1997 Tax Reform Act. This act raised the amount of excludable gain to $250,000 per taxpayer, and also allowed for more than one exclusion per per lifetime.