Principal Residence Tax Exclusion Act of 1996

Principal Residence Tax Exclusion Act of 1996 - Amends the Internal Revenue Code to replace the existing one-time exclusion of up to $125,000 of gain from the sale of a principal residence by a person at least 55 years old with an exclusion of gain of up to $250,000 ($500,000 for qualifying joint return) for a qualifying sale of a principal residence regardless of the person's age.

Applies such exclusion to only one sale or exchange every two years. Repeals the provision providing for nonrecognition of gain on principal residence rollovers.