Trump wants to end capital gains tax on home sales
Recently, Trump said he was “thinking about” ending capital gains taxes on home sales. Who benefits?
“The biggest beneficiaries of such a change will likely be longtime homeowners in the country’s more expensive housing markets.
“Removing or increasing the capital gains limit — currently $250,000 for single homeowners or $500,000 for married couples — on home sales has been a longtime priority for the real estate industry, which argues that steep tax bills are keeping some homeowners who wish to relocate or downsize stuck in homes that no longer fit their needs.”
Sounds like a good idea to promote greater liquidity in the housing market, right? Maybe for larger homes in rich neighborhoods, but what about folks who want to downsize?
“This will primarily affect people in affluent towns and those who have owned their homes for a long time,” [Alex Caswell, founder of Wealth Script Advisors in San Francisco] said. “We have experienced a significant price increase since the lows of 2008, so anyone who bought after that period stands to benefit significantly.”
“He thinks buying and selling activity could tick up in those states if the bill were to pass, but he worries the dynamics could also mean more older homeowners with lots of purchasing power would be competing with first-time homebuyers for smaller, cheaper homes.”
Maybe just raise the capital gains limit and index it for inflation. And build more housing.
End capital gains taxes on home sales?
“The biggest beneficiaries of such a change will likely be longtime homeowners in the country’s more expensive housing markets.
“Removing or increasing the capital gains limit — currently $250,000 for single homeowners or $500,000 for married couples — on home sales has been a longtime priority for the real estate industry, which argues that steep tax bills are keeping some homeowners who wish to relocate or downsize stuck in homes that no longer fit their needs.”
Sounds like a good idea to promote greater liquidity in the housing market, right? Maybe for larger homes in rich neighborhoods, but what about folks who want to downsize?
“This will primarily affect people in affluent towns and those who have owned their homes for a long time,” [Alex Caswell, founder of Wealth Script Advisors in San Francisco] said. “We have experienced a significant price increase since the lows of 2008, so anyone who bought after that period stands to benefit significantly.”
“He thinks buying and selling activity could tick up in those states if the bill were to pass, but he worries the dynamics could also mean more older homeowners with lots of purchasing power would be competing with first-time homebuyers for smaller, cheaper homes.”
Maybe just raise the capital gains limit and index it for inflation. And build more housing.
End capital gains taxes on home sales?
I believe the current law requires that you reside in the home for 5 years before you get the exemption. Certainly, I have never run up against the limit– to be honest I never knew there was a limit– but I lived in my “starter house” for 35 years. I guess I would have no problem with increasing the exemption although it seems like a benefit only for well to do Americans, provided they keep the minimum 5 year residency requirement.
IRS:
So it is two years. I believe the out of the past five is to accommodate people who take longer to sell because of bad market, divorce, waffling during downsizing, etc, but it opens up possibilities for flipping.
What do some people care that anyone other than themselves pay in taxes, whether it is federal or state income tax, capital gain tax, sales tax, estate tax, etc. ?
I say this because every individual or family’s income and tax situation is unique. As in, different from anyone else commenting, so general comments are just that and don’t fit anyone’s individual situation.
@Iron,
Because in a civilized society, collective action scales to solve large problems. Also because fairness matters.
Hope that helps.
Iron:
Yes, Unique to a particular income level. Some incomes and taxes are more unique than others.
If we sold our current house at around the current “market rate,” it would certainly look as if we owed capital gains tax. Let’s work with round numbers: buy for $150, live here 30 years, sell for $1,000. $850 gain – $500 exclusion = $350.
But there is also home repairs and home improvements, which are deductible from that amount. Right now, we’re at a bit over $200, but getting ready to sell is probably another $25-30, so ballpark it at $250. Now we’re down to $100.
Say 5% goes to realtors (on both sides). -$50. Down to $50. And so far I haven’t even tried to reduce tax exposure.
And–to make it more interesting and demonstrate Alex Caswell’s point–we owe nothing if we buy another house within something like six months to a year. And we can pay $800 cash under this scenario–more than enough to buy a slightly smaller mother-daughter or ranch in less expensive area. Or a house to put in trust for one of our children.
And the return for the property over those 30 years averages about 6.346%–before those repairs/improvement costs.
That’s in a very good market. Houses are just not good long-term investments. Much better to keep trading up.
Ken:
If you can get your money out of it, you have the funds to do it all over again. There is always something needing to be done, Or some improvement you may want. Once you do it, you lost value.