Not long ago, if you sold your home, you’d have to pay taxes on any profit, which can be a significant chunk of change. For most folks, the only alternative was to buy a more expensive home. But what if the whole point of selling was to cash out that home equity so you could downsize and cut back? Congress realized this was a problem and came to the rescue with the Taxpayer Relief Act of 1997, which included the capital gains exclusion for people selling their homes.
HOW DOES THE ACT HELP HOMEOWNERS?
The Act allows you to sell your primary residence and save up to $250,000 of those sale proceeds ($500,000 for married couples) without having to pay capital gains tax to the IRS. The only requirement is you need to live in your home for at least two of the five years before you sell it.
Over time, the Act has been modified to help homeowners who needed to sell their homes, before that time period, because of changes in employment, health, marital status, or other unforeseen circumstances.
So you can see how the capital gains exclusion helps sellers build and preserve their savings, particularly those nearing retirement.
HOW MUCH HAS THE ACT HELPED?
Americans were able to set aside an estimated $86 billion in savings over the past four years, thanks to the capital gains exclusion — even with a tough job market and slow economy,
But the exclusion also helps home buyers. Knowing they’ll be able to keep their sale proceeds without paying a hefty tax encourages many homeowners to sell, which increases housing inventory while creating more choices for buyers. That, in turn, helps keep housing prices affordable.
Particularly now, as more and more of us are facing a hard time earning, saving, and retiring, we all need to tell Congress “hands off” the capital gains exclusion for homeowners!
You can send your message and tell Congress ‘hands-off’ the Capital Gains Exclusion for Homeowners by filling out this quick form.
by HOM Editor
Courtesy of National Association of REALTORS
For more homeowner information and news, visit: http://homeownershipmatters.realtor/