Here’s a good review of the recent Dave Camp tax proposal:
Under intense scrutiny will be the two-out-of-five-year rule – Congress will find it irresistible to tinker with so much tax-free money:
Under Camp’s proposal, you’d need to own your house for five out of the preceding eight years to claim a tax-free exclusion and you could exercise this privilege only once every five years. Capital gains exclusions for home sellers with high incomes — $250,000 a year for singles and $500,000 a year for joint filers — would be phased out altogether over a period of years.
If Camp’s idea of exercising this ‘privilege only once every five years’ does get approved, it should curtail the move-up market.
1. People get too comfortable. After 2-3 years, it still feels like you just moved in and there isn’t as much attachment to the home. After five years, real roots have been established.
2. Kids have more friends in the neighborhood. Kids grow up a lot in 5-6 years, and they don’t mind imposing their ideas upon you regarding a move.
3. Remodeling will be a more-likely route. If the two items above are bearing down on you, then just fixing the old house will be a happy compromise.
More of today’s homebuyers are already looking longer-term than any since the 2-out-of-5 rule was enacted in 1997 – let’s face it, the rah-rah days are over. Changing the law will just be the final straw that will cause people to stay put.
Consider these changes when buying your next house – it may have to last you for a long time, and maybe forever! Get good help!