Q: I read in a magazine that one way to bolster my retirement savings is by using my home.

The writer suggested that I sell my house and move to a less expensive one. I would be able to pocket the difference tax free, up to $250,000 for a single person.

I knew this, but then he suggested that someone could move into an investment property, make that their new residence and after two years, sell it and take the profit tax-free.

We have an investment property, and are thinking about moving into it to live. But I thought the tax-free exemption could be used only once in a lifetime.

Is this true? We are only two years from retirement and following this plan could really help finance our retirement.

A: The short answer is yes. Tax laws changed several years ago and now you have more flexibility when it comes to keeping the profit from the sale of your home. Here is a quick overview of the rules:

First, you can keep up to $250,000 (or up to $500,000 if you’re married) in profits when you sell your primary residence. But, you must have lived in the home as your primary residence for 2 of the past 5 years. That means, you must have spent the majority of time during the year living in the home.

If the property was originally a rental or income-producing property, but you have now lived in it as your primary residence for 2 of the past 5 years, you can keep the profits tax-free up to the prescribed limits. (Don’t forget to factor in any depreciation you have taken on the property.)

Once you sell your home, you can move into another home and start the clock ticking all over again. This new home can be something you’ve just acquired, or it can be a rental property or vacation home that is now going to become your primary residence. Once you live in this property for 2 years, you can take another $250,000 or $500,000 if you’re married tax free in profits from the sale.

You can take the tax-free exclusion once every 24 months. So, if you’re good at picking up-and-coming neighborhoods, or if you like fixing up and decorating a house, and don’t mind moving every couple of years or so, you might have an excellent way to supplement your retirement income.

What happens if you can’t live in your home for two years? Well, it depends on why you have to sell and move. If you sell because you’re taking a new job that is more than 50 miles from your current job, or because of a divorce, illness or death, then you may be able to take a portion of your profits tax free.

To read more about this tax law, go to www.irs.gov and look up Publication 523 “Selling Your House.”