Someone told me that I need to sell this year to take advantage of a tax break on capital gains. My husband and I had lived in this house for many years, and the idea of losing my husband and moving within the same year is a bit overwhelming.

I know I need to move to a place that requires less maintenance and yard work, but is the tax savings going to be so great that I need to move this year?

We bought our home for $126,000, and, as crazy as it sounds, in today's market, similar homes in this area have been selling for close to half a million dollars. I thought that because I'm older than 55, I would receive a onetime exclusion of $125,000, regardless of when I sell.

Do I really need to sell this year, as my friend suggests, because of a new tax law?

A: I'm sorry to hear of your loss, and I agree that the last thing you need to be worrying about is selling your home and moving this year.

There are some tax advantages to selling your home sooner than later, but you no longer have to sell in the year of your spouse's death.

You are correct that under previous law, a taxpayer 55 or older got a onetime $125,000 exclusion on capital gains as a result of the sale of a primary residence.

The change in the tax law that your friend is referring to isn't so new, but a recent change may be of help to you. The rules under the Taxpayer Relief Act of 1997 provide that you may exclude the gain from the sale of property you own if that property was owned and used as your principal residence for at least two years during the five-year period ending on the date of the sale. This exclusion applies to only one sale every two years.

Taxpayers who do not meet the two-year ownership and use test or those that use the exclusion more than once in two years may qualify for a partial exclusion.

Individuals can exclude as much as $250,000, and married couples as much as $500,000. To qualify for the full $500,000 exclusion, married couples must file a joint return, either or both spouses must have owned the residence for at least two of the five years before the sale, and both spouses must have used the home as their principal residence for at least two years out of the five.

Previously, the full $500,000 exclusion could be claimed by a surviving spouse only if the home was sold in the year that a joint return was filed. For sales after 2007, a surviving spouse may exclude tax up to $500,000 if the sale occurs within two years of the date of death.

Here are other tax breaks resulting from the Mortgage Forgiveness Debt Relief Act of 2007, brought to my attention by SunTrust mortgage broker J. Scott Johnson and Todd K. Ballenger, author of "Borrow Smart Retire Rich," via the Thomas, Judy & Tucker CPA newsletter:

* Cancellation-of-debt income: Normally, the tax benefit resulting from a debt cancellation, or forgiveness, is taxable. But the act allows a tax-free exclusion of as much as $2 million for mortgage forgiveness on a principal residence, with a few minor exceptions.

Example: The exclusion is not available to individuals in Chapter 11 bankruptcy. The tax exclusion applies to discharges for the three-year period after 2006 and before 2010.

* Mortgage insurance premiums: For the 2007 tax year only, taxpayers were allowed to deduct the premiums as qualified residence interest. At least a partial deduction was available for contracts issued after 2006 if the taxpayer's adjusted gross income for the year did not exceed $109,000. (The threshold for the full deduction was adjusted gross income of $100,000.) Now the new law extends this tax break for three years for premiums paid or accrued before 2011.

* Co-op tax breaks: If certain requirements are met, the tenant and stockholders of a co-operative (informally referred to as a "co-op") can claim allocable deductions for mortgage interest and property taxes. The law liberalizes the test used to qualify as a co-op for this purpose. This change applies to tax years ending after Dec. 20, 2007.

* Emergency responders: Finally, the new law creates an exclusion for members of qualified volunteer emergency response groups, such as firefighters and medical personnel. For state or local tax benefits or qualified payments received for volunteer services, they can exclude as much as $360 a year from tax. The exclusion applies to amounts paid after 2007 and before 2011.