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Commander-in-Thief Trump Keeps Stealing My Ideas!!! Now He Wants to Eliminate Capital Gains Taxes on One's Primary Residence.

First the no tax on tips idea and now this.

This would help with home sales since reluctant homeowners who might want to sell, especially seniors, would otherwise be hit with huge capital gains taxes if they've lived in their homes for decades.

If Canada can do this, why can't we, eh?

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RedBaron · M

There’s already a $250k residency exemption per taxpayer, ie $500k for a married couple, plus the IRS has no purchase date or cost basis information, so many people don’t pay any capital gains tax on selling their homes anyway.

samueltyler2 · 80-89, M

@RedBaron that was my point.

beckyromero · 36-40, F

@RedBaron

There’s already a $250k residency exemption per taxpayer, ie $500k for a married couple

@samueltyler2

I've already said that and pointed out how that does not help seniors who have been in their homes for decades.

samueltyler2 · 80-89, M

@beckyromero please let us not argue about that. I am a senior who did take advantage of that. Our original purchase was $42k in 1972, with trade ups, we ended up selling for $780k. You are entitled to take all upgrade costs off of the capital gains. We ended up with no tax on the $780!

beckyromero · 36-40, F

@samueltyler2

You are entitled to take all upgrade costs off of the capital gains. We ended up with no tax on the $780!

Good for you!

(For some readers who may not know, The Taxpayer Relief Act of 1997 eliminated the "rollover rule" which had previously allowed homeowners to defer capital gains taxes if they reinvested their gains into a new home of equal or greater value.)

Certain improvements (such as a room addition) will raise your tax basis (this lowering the capital gains tax hit) when you sell the property.

But routine maintenance, repairs and unkeep does not. Nor the cost of homeowners insurance. Nor the cost of your mortgage payments.

Now, if it's a rental property, you get to deduct nearly all costs associated with it on your income tax filing, with major capital improvements depreciated over time.

samueltyler2 · 80-89, M

@beckyromero I don't know why i bother with you, you are a ring like the MAGAs now.

I told you I went through this, so I know what was allowed and not allowed.

remodelling of bathrooms, kitchens, etc are considered appropriate to decrease the apparent profit. Of course routine costs are not applicable.

beckyromero · 36-40, F

@RedBaron

many people don’t pay any capital gains tax on selling their homes anyway.

from Realtor.com

Today, roughly 1 in 3 homeowners—nearly 29 million households—have built up more home equity than the federal capital gains tax exclusion for single filers protects when they sell their primary home, according to a recent analysis by the National Association of Realtors®. By 2030, that number is expected to grow to 56% of homeowners.

In the decades since (the The Taxpayer Relief Act of 1997), home prices have climbed more than 260%, while the tax exemption has stayed exactly the same. If it had kept pace, the cap would now be about $660,000 for individuals and $1.32 million for couples, according to research from the University of Illinois Chicago.

For middle-income families, this creates a lose-lose situation: Either sell now and hand over a huge slice of your hard-earned profit, or hold the asset just to avoid a tax that many assumed they’d never owe in the first place. In the meantime, younger buyers lose out on homes that could otherwise hit the market, feeding an affordability crunch for everyone.
Penalized if you stay, penalized if you sell

For longtime homeowners sitting on decades of appreciation, the prospect of selling and triggering a five- or six-figure tax bill often seems untenable. Some, as Liddiard explains, simply give up on using their whole house.

"We hear reports from some of our members saying some of these folks have moved to the main floor of their home, and they never go upstairs, never go downstairs, because they're too feeble to do so,” he says. “But they either can't afford to pay the capital gains tax, or they refuse to, because they know that when they die, the home can get a step up in basis [and] nobody has to pay the taxes."

https://www.realtor.com/advice/finance/home-equity-tax-capital-gains/

RedBaron · M

@beckyromero Incorrect. The residency requirement is only two years, so the exemption does benefit seniors and anyone else who is selling a house they lived in.

beckyromero · 36-40, F

@RedBaron

Geez Louise!!!!

I am talking about LONG-TIME homeowners that have NOT sold for decades. And how capital gains effects them if they do sell.

What the hell is so difficult to understand about that?!

RedBaron · M

@beckyromero A lot depends upon the knowledge and savvy of one’s accountant.

The IRS has no way to know when the seller purchased the house or for how much, so there’s a big gray area in which the taxpayer can take the benefit of the doubt.

The cost basis can also be adjusted upward with the cost of improvements, so avoiding significant capital gains tax is a relatively simple matter.

beckyromero · 36-40, F

@RedBaron

The IRS has no way to know when the seller purchased the house or for how much

Ever hear of this thing called "Google"? Supposedly it's on someplace called the "Internet." 🤔

Of course the IRS knows!!!! Or can easily find out!

And then someone who tries to take advantage of that "big gray area" will find themselves looking for a tax attorney to fight a prosecution of tax fraud.

RedBaron · M

@beckyromero

I am talking about LONG-TIME homeowners that have NOT sold for decades. And how capital gains effects them if they do sell.

Geez Louise!

That’s exactly what I addressed.

1. The residency requirement for the exemption is TWO YEARS, so it certainly benefits seniors who are longtime residents.

2. The IRS has no information about date or price of purchase, so a savvy accountant can make sure that the taxpayers get the benefit of that doubt and pay little or no capital gains tax.

Now I’m sure you’re capable of understanding that. The whole issue can easily be rendered a nothing burger.

RedBaron · M

@beckyromero

And then someone who tries to take advantage of that "big gray area" will find themselves looking for a tax attorney to fight a prosecution of tax fraud.

Boy are you naive about how tax authorities operate. But whatever you say.

beckyromero · 36-40, F

@RedBaron

1. The residency requirement for the exemption is TWO YEARS, so it certainly benefits seniors who are longtime residents.

2. The IRS has no information about date or price of purchase, so a savvy accountant can make sure that the taxpayers get the benefit of that doubt and pay little or no capital gains tax.

Now I’m sure you’re capable of understanding that. The whole issue can easily be rendered a nothing burger.

You're just being obstinate now.

Many long time homeowners would have a gain that would EXCEED their capital gains exclusion!

As far as sales price:

https://www.realtor.com/realestateandhomes-detail/1755-Sunset-Ln_Bannockburn_IL_60015_M89552-36307?from=srp-list-card

This house is currently on the market for $3,429,000

It last sold on March 2, 1993 for $945,000

If it sells for the asking price, it would be a gain of $2,484,000

If it's owned by a couple, that's a capital gain of $2,484,000 - $500,000 ... or $1,984,000.

Say they are a married couple filing jointly and earning $94,050+ a year or only one of them works and earns $63,000+

Under those scenarios, their capital gains tax rate would be 20% - or $396,800.

Now, that might be reduced somewhat if they made some additions or major renovations since 1993. Otherwise, that's the check that Uncle Sam will collect.

beckyromero · 36-40, F

@RedBaron

Boy are you naive about how tax authorities operate.

https://www.irs.gov/pub/irs-pdf/f8949.pdf

RedBaron · M

@beckyromero So how exactly does, say, $2 million net of taxes suck?

This is definitely a first world problem.