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I'd like to know what other professionals are thinking the new Capitol Gaines Exemption plan might do to their businesses.
For those who don't yet know what I'm taking about, the current tax laws allow people to sell their homes tax free, as long as they've lived their for 2 of the past 5 years (up to 250k single-500k married). The new bill will change that to 5 of the last 8 years.
This may completely screw many or all of people who have recently listed, or were planning to list in the months to come, as what ever gains their property has realized can now be taxed if they haven't owned it for at least 5 years, IF this bill gets passed.
Personally I may be completely screwed on my current home, as I've lived their for about 3.5 years, planning to list in the spring, and have thrown most of the labor and material receipts in the trash, adding up to what would've been 50-60k in deductions.
Chances are looking like this will have a devastating impact on the market too. Perhaps not in the way of home prices, as much as regarding the volume of home sales.
I expect fewer investors to have fewer investment dollars, and more properties will be going to the corporate world via foreclosures.
What do some of you think?
so just because you personally may take it in the shorts, the whole industry is going be crushed??
if you're thinking of this as a Buyer, and the loss of value became true, yes.
but in a general state of the market where there aren't enough homes for sale, and you're now disincenting folks who haven't owned their homes 5 years from putting it up for sale, then no.
the MID was made $750K, and of course only applies to new purchase mortgages. Those of us with an existing home and mortgage, there's no change to the law.
I'm quite unclear about the 2/5 ownership vs proposed 5/8 ownership ... it appears they maybe scrapped the change and stuck with 2/5. But you have to be able to read government-ese to understand.
I'm not sure this discussion was intended to be limited to the MID and the rules around what may be considered a flip... there are certainly consequences to the RE market from this holiday gift. SALT cap. Lower tax bracket breaks set to expire. Savings tied to child care credits, which expire (when your kids age out).
There doesn't appear to be much in this plan to help the average homeowner over the long run and certainly will change the dynamics of home purchasing in property tax heavy metros.
Is there a link to the actual facts? The op just has a link to another citydata forum, so six pages in we still have no answers.
Yes.
I have a pending sale going on right now, so I freaked out about capital gains. Here's what I found:
This is the conference report:
(emphasis mine)
Quote:
Conference Agreement The conference agreement does not include the House bill provision.
14. Modification of exclusion of gain on sale of a principal residence (sec. 1402 of the House
bill, sec. 11047 of the Senate amendment, and sec. 121 of the Code)
Present Law
A taxpayer who is an individual may exclude up to $250,000 ($500,000 if married filing
a joint return) of gain realized on the sale or exchange of a principal residence. To be eligible for
the exclusion, the taxpayer must have owned and used the residence as a principal residence for
at least two of the five years ending on the date of the sale or exchange. A taxpayer who fails to
meet these requirements by reason of a change of place of employment, health, or, to the extent
provided under regulations, unforeseen circumstances, is able to exclude an amount equal to the
fraction of the $250,000 ($500,000 if married filing a joint return) that is equal to the fraction of
the two years that the ownership and use requirements are met.
The exclusion under this provision may not be claimed for more than one sale or
exchange during any two-year period.
House Bill
The provision extends the length of time a taxpayer must own and use a residence to
qualify for this exclusion. Specifically, the exclusion is available only if the taxpayer has owned
and used the residence as a principal residence for at least five of the eight years ending on the
date of the sale or exchange. A taxpayer who fails to meet these requirements by reason of a
change of place of employment, health, or, to the extent provided under regulations, unforeseen
circumstances is able to exclude an amount equal to the fraction of the $250,000 ($500,000 if
married filing a joint return) that is equal to the fraction of the five years that the ownership and
use requirements are met.
The provision limits the exclusion so that the exclusion may not apply to more than one
sale or exchange during any five-year period.
The provision phases-out the exclusion by one dollar for every dollar a taxpayer’s AGI
exceeds $250,000 ($500,000 if married filing a joint return). For purposes of this provision, AGI
109 is measured using the average of the taxpayer’s AGI in the year of sale (excluding any income
from the sale of the home) and the prior two taxable years before the sale.
Effective date.−The provision is effective for sales and exchanges after December 31,
2017.
Senate Amendment
The Senate amendment generally follows the House bill, but does not include the
provision that phases out the exclusion for AGI in excess of $250,000 ($500,000 if married filing
a joint return). The Senate amendment does not apply to taxable years beginning after December
31, 2025.
Effective date.−The provision is effective for sales and exchanges after December 31,
2017.
I'm surprised this particular provision in the House bill was not bigger news. It would indeed have hurt real estate in many markets throughout the country, and particularly hurt people who bought wisely into rapidly appreciating markets. To modify it to 5/8 would have significantly impacted sales volume in rising markets and hurt a lot of middle class people who planned to roll their equity into a new house. Stupid, stupid way to tax. It would have skyrocketed rents and prices even more in places like California and Colorado, because a LOT of homeowners would have remained in their houses for another couple years, further reducing inventory.
Since I read a good 1/3rd of the final bill related to individual taxes and scanned the rest... my takeaway is that they removed a lot of the medicine and kept a lot of the goodies, at least temporarily. This is how they picked up a few more of the blue state Republicans.
Most of the goodies go away for individuals after a few years. The business taxes stay. Businesses are getting an enormous tax break, forever. This will explode the deficit in the next few years. Bigly.
I don't expect real estate to get hit that hard now and continue more or less on the same path. The mortgage deduction changes may make some marginal changes, especially to high cost markets like New York City.
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