Home Sale Benefit Pared Back In GOP Tax Plan

Two aspects of the tax reform bill may further reduce the already tight housing inventory. Soon an owner will have to live in their home for 5 out of last 8, instead of the current 2 of last 5, to avoid some capital gains tax when they sell. Also, new mortgage loans would have less desirable tax benefits, so some owners may choose to stay put to keep their existing loans.

Home Sale Benefit Pared Back In GOP Tax Plan

The House Republican tax plan would claw back a benefit for high-income homeowners: The ability to declare that most profits from home sales aren’t taxable capital gains.

The proposal retains the current exclusion—$500,000 for married filers and $250,000 for others. But unlike current law, the benefit would phase out for high-income taxpayers, getting reduced once adjusted gross income hits $500,000 for married couples and $250,000 for others.

The proposal also brings back an older rule for claiming the benefit. To get the exclusion, taxpayers must have used the home as their principal residence for five out of the previous eight years. Current law requires the taxpayer to have lived there for two of the previous five years.

-Richard Rubin The Wall Street Journal