Q: You recently answered a question regarding capital gains tax treatment that I found confusing.

I believe you said that the IRS requires you to live in the house for two of the last five years in order to keep the gain tax free.

Is it five years or two years that I need to live in my house before I sell it? I’ve currently lived in my house for 3 years, which is the entire time I’ve owned it. Can I now take my gain tax free?

A: Happily for you, the IRS requires only that you live in the home as your primary residence for two of the last five years. You get to pick which two of the five years to count. So, if you lived in the home five years ago and four years ago, and then rented it out for the last three years, you should still be able to use the capital gains exclusion.

If you have owned the property for 3 years, and lived there the entire time, you may take up to $500,000 in profits tax free if you’re married or $250,000 in profits if you’re single.

The IRS has recently clarified the rules for those who have lived in their home for less than the 24 month requirement.

In cases where you had to sell in less than two years because you took a new job that was 50 miles away from your old one, got sick, or due to terrorism or other special hardship cases, you may still be able to take a portion of your profits tax-free. In addition, if you are a member of the uniformed services or Foreign Service, you may also be excluded from the 2-year ownership requirement.

These new rules date back to any house that was sold after May 6, 1997. If you paid tax on your gain, you may be entitled to a refund. Talk to your tax advisor for details.

You can also read the new rules in the newly-revised IRS Publication 523, which can be downloaded at the IRS website, www.irs.gov.

Q: If I use a non-profit credit counseling agency to help me manage my money, would that hurt my credit in any way? I have always made my payments on time and paid more than just the minimum, but lately I’ve been living off my credit cards and I want to get control over this.

A: It sounds like you are having some serious budgeting issues. That can put you at risk of falling for a credit counseling agency that isn’t exactly on the up-and-up.

Many consumers are surprised to learn that there are good credit counseling companies and bad ones. Just because the one you’re using carries the “non-profit” label doesn’t mean it isn’t making money for its owners. “Non-profit” also doesn’t mean the counselors are really working on your behalf.

In fact, the IRS and the Federal Trade Commission, not to mention several attorneys general from various states have been looking into so-called non-profit credit counseling agencies to see if they’re helping or hurting consumers. Last year, Lisa Madigan, attorney general for the state of Illinois, kicked out one so-called “non-profit” credit counseling agency because left dozens of consumers worse off after a debt management program than when they started it.

Once you find a good credit counseling agency, there are different ways it can help, some of which will affect your credit history.

For example, the National Foundation for Consumer Credit (www.nfcc.org) is affiliated with Consumer Credit Counseling Service offices nationwide. You can go into a CCCS office, or work with a counselor by telephone, to get free or low-cost budget planning services.

Getting help with your budget won’t affect your credit history or credit score. But if you sign up for a debt management program (DMP), that program will manage your credit and payments for you. Being part of a DMP is listed on your credit history and will lower your credit score until you have paid off your debt.

But if you don’t have a debt problem, you shouldn’t use a DMP as a bill-paying service because creditors assume that you are unable to manage your money, and that fact alone could tank your credit score.

If you have enough cash to pay your bills, but are having trouble making the payments on-time, sign up to either pay these bills online, or have your checking account auto-debited.

Either way, using a non-profit credit counseling service to pay bills isn’t doing you, or your credit score, any favors. But it can certainly provide you with the budgeting assistance you need to get your financial affairs in order.

Jan. 19, 2009.