If you wanted proof that the tight-inventory era will persist – and possibly get worse – over the next few years…..well, here you go. As prices have risen sharply, so has home equity – which means the long-time owners can be looking at a six-figure tax hit, even after the 2-out-of-5-year tax exemption.
While you can make the case that the capital-gains tax gets paid with the same-and-seemingly free money created by the recent home-price appreciation, Americans have a real aversion to paying taxes. Especially in six-figure amounts!
The long-timers who might consider selling their home are smart to calculate the potential capital-gains tax first. For most, it will probably be the last straw!
that’s right Jim. I’m an estate planning attorney and there’s no way I’d advise my client (if my client was elderly Mom) to sell if Mom cared about reducing taxes and there were ANY alternatives. There are usually PLENTY of alternatives such as renting out the property, reverse mortgage, etc. That applies not just to clients who are 101 years old with highly appreciated real estate but any elderly clients.
whoops — this didn’t make it in the last one, but there are charitable planning strategies that can benefit Mom, her family AND a charity that work for families with highly appreciated real estate that they don’t want to pay capital gains taxes on
Right on point Jim!
Thanks Curtis!
If the step-up in basis goes away, mom’s kids and grand kids will get screwed. Wealth redistribution at its finest. We love you Joe and AOC!
If big government would give a huge reduction in capital gains taxes for real estate you would see a flood of homes come up for sale. I am NOT selling any of my 20 properties because the cap gains.
If government cared about fixing the housing dilemma, they would change the capital-gains tax for real estate sales.
It would be the easiest way to stop this runaway train and provide more inventory immediately.
Thanks Bobbi!