If you used pre-1997 rules for residential sales, don't worry. That doesn't disqualify you from claiming the exclusion on any residential sales now. The law change applies to all sales since it took effect.

Another bonus of the new rules: You don't have to buy another home with your sale proceeds. You can use the money to travel to Europe in style, buy an RV and drive across the country or get all those designer shoes you never could afford before.

Even better, there's no limit on the number of times you can use the home-sale exemption. In most cases, you can make tax-free profits of $250,000 (or $500,000 depending on your filing status) every time you sell a home.

Ah, but we are talking taxes here. You did notice that phrase "in most cases," didn't you? Before you put a "For Sale" sign in the yard, you need to make sure your house-sale situation is one of those "most cases."

First, the property you're selling must be your principal residence. That means you live in it. This tax break doesn't apply to a house or other property that you have solely for investment purposes. In those cases, the usual capital gains rules apply.

You can, however, turn a rental house into your primary residence, making the sale of it eligible for the exclusion. This is accomplished when you meet the IRS use and ownership tests: You own and live in the home for two out of the five years before the sale.

And your actual habitation of the home doesn't have to be sequential, notes Mark Luscombe, lawyer, accountant and principal tax analyst at CCH Inc., a Riverwoods, Ill.-based provider of tax law information and software. The IRS lets you aggregate your time living in the house to meet the two-year residency requirement.

"Generally, if you owned and used the home as your main home for periods totaling at least two years within five years ending on the date of these sale, you're eligible for the exclusion," says RIA's Trinz. "You look back at the last five years. Ownership and use may be at two different times. This would apply if you owned a home for five years, but didn't use it as your primary residence for that full period. For the first three years, you rented it and then moved into it as your main home for the final two before you sold it."

But you don't even have to live in the house at the date of sale. The flexibility of the use test means you could live in your house for a year, rent it for two, move back in for another year and rent it again the year before you sell. Since during those five years you owned and lived in the property for two years, you meet the use and ownership tests.

Finally, while technically there's no limit on the number of homes you can sell and reap tax-free gain, each sale must be at least two years apart. That still leaves you room to make some money on several properties. You can sell your residence this year, pocket any gain within the tax limits and buy a new residence. Two years later, you can do the same thing, again and again every two years.