Realtors need your help to inform lawmakers and the Administration about the growing impact of outdated capital gains tax limits on homeowners and the housing market.
Since 1997, the tax code has capped the capital gains exclusion for the sale of a primary residence at $250,000 for single filers and $500,000 for joint filers. While these amounts were once generous, they have remained unchanged for over 27 years, despite significant increases in home values.
As a result, many longtime homeowners—especially older individuals who have lived in their homes for decades—now face substantial tax bills when selling. With home prices far exceeding the exclusion limits, sellers may owe tens of thousands of dollars or more in capital gains taxes. This discourages them from selling, reducing available housing inventory and driving up prices—particularly for first-time buyers.
The Solution: Adjust Capital Gains Exclusions
By increasing the capital gains exclusion and indexing it to inflation, we can:
- Remove financial barriers that prevent homeowners from selling.
- Increase housing inventory, helping to balance the market.
- Make homeownership more accessible, particularly for new buyers.
Your Voice Matters
Lawmakers need to understand how this issue affects real people. Your stories can illustrate the real-world consequences of outdated tax limits and push for much-needed reform. Together, we can advocate for a fairer housing market that benefits everyone
Understanding Capital Gains in Real Estate
When selling a home, capital gains taxes apply to the profit—the difference between the home's adjusted cost basis and its selling price. Here's how to calculate it:
1. Purchase Price: ___________
o The original sale price when you bought the home (not just your out-of-pocket closing costs).
2. Total Adjustments: ___________
o Include:
§ Purchase-related costs: Transfer fees, attorney fees, inspections (excluding mortgage points).
§ Selling costs: Realtor commissions, attorney fees, inspections, and pre-sale repairs.
§ Home improvements: Major upgrades like room additions or decks (not regular repairs like roof replacements).
3. Adjusted Cost Basis: ___________
o This is your purchase price + total adjustments.
4. Capital Gain: ___________
o Subtract your adjusted cost basis from the selling price to determine your taxable gain.
Understanding these rules can help homeowners reduce their tax burden and make informed decisions when selling. Contact your Congress Person and let them know your stories. NAR (National Association of Realtors) are fighting this battle now with Congress.
Minnie Rzeslawski is broker/owner of 24K International Realty and is affiliated with RE/MAX City Real Estate with over 36 years of experience. She can be reached at (619) 804-5373 or [email protected].
