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The National Association of Realtors forecasts that by 2035, close to 70% of homeowners might have gains exceeding $250,000 and 38% of them will have more than $500,000.
Per AI
I just read an article in which it was reported that in comments to the press on Tuesday the President suggested he is considering eliminating capital gains taxes on the sale of homes.
The article reviews the rules to claim this benefit which is definitely in the near(er) future for Humble Dollar readers
If you have lived in it as your primary residence for at least 24 months (consecutively or not) in the previous five years before you sell it, you may be allowed to exempt from the capital gains tax the first $250,000 of your gains if you’re single or $500,000 if you’re married filing jointly. The capital gains exemption thresholds have not adjusted for inflation since they were set in 1997.
In 2025, filers will owe 0% in capital gains tax for gains above the exemption threshold if their taxable income is below $48,350 (or $96,700 if married filing jointly), according to the IRS.
They will owe 15% if their income is between $48,450 and $533,400 (or between $96,700 and $600,050 for joint filers). And any filer with income above those levels will pay a 20% capital gains rate.
To be able to claim the full exemption for couples after death of a spouse:
“In 2025, filers will owe 0% in capital gains tax for gains above the exemption threshold if their taxable income is below $48,350 (or $96,700 if married filing jointly)”
Would the capital gains from a home sale be included or excluded from taxable income threshold above?
The question about capital gains tax implications for home sale after the death of a spouse can depend on what kind of step-up the surviving spouse receives. Those of us who live in states that follow Community Property law, and who hold the title to the home as CP, have an advantage. Unlike non-CP states in which only the half of the home owned by the deceased spouse gets the step-up to current value, in CP states because CP is not divisible, the entire value of the home is stepped-up to current market value as of the date of death of the deceased spouse. Therefore, in CP states the question of capital gains tax is moot.
According to the BLS Inflation Calculator, had the $250K and $500 been adjusted for inflation they would be double by now. I still run into people who think the pre-1997 rules on house sales (rollover, over 55 exclusion, …) are still in effect. I guess it is such an infrequent transaction for many people that has not become common tax knowledge.
It is still in effect in a way. If you are like me and sold a home in 1979 and rolled that gain over into a home that you still own today. That gain has reduced my basis in the 1980 purchase to around $50k….the exemption, in my opinion, is way, way too low…..😳
Assume you mean “considering eliminating capital gains tax exemptions”?
To be honest I wouldn’t worry about it – putting a tax on geographic mobility is not likely to win Congressmen and Senators many votes unless it’s seen that only “liberals” ever need to relocate for work, family etc. I could see a certain reactionary view maybe that taxing them folk is just fine as I’m staying in my house til I die.
Alas, no. A quick search says he proposed eliminating the tax not the exemption. You would have thought he had done enough damage to the federal debt without this.
OK – I understand the point but it would only benefit the already wealthy who own multiple homes – not exactly MAGA man of the people*
*of course I have considerable scepticism that the whole dog and pony show isn’t really about making the rich and powerful more so at the expense of the electorate.