This might pass and become the new law. It’s a $170,000 tax-saving windfall for homeowners – but you have to sell your home and move to get it!
More lawmakers are getting behind a bill to double the capital gains tax exclusion to curtail the penalty on home sellers.
The More Homes on the Market Act attracted seven additional co-sponsors as chambers adjourned for the August recess. Three Democrats and a Republican signed on before leaving town. Three more Republicans signed on shortly after.
Three Democrats and three Republicans in the House threw their support behind the bill: Patrick Ryan of New York and Doris Matsui and Lateefah Simon of California. Several days later, John Joyce of Pennsylvania, Richard McCormick of Georgia, and James Gallagher of California also signaled support.
In the Senate, Republican David McCormick of Pennsylvania also co-sponsored the bill.
There are now 154 House members and 23 Senators who support the bill. That includes 1 in 3 of the 435 voting members, plus several nonvoting members. The two versions are almost identical, except for one provision that relates to how to index the exclusion to inflation. Both chambers would need to agree on a final version of the bill.
The National Association of Realtors® also champions the bill to change the tax scheme, because it could allow more people to sell their homes without incurring a punishing tax bill.
Kevin Brown, president of NAR, lobbied for the law as he spoke to a panel in Congress in June. He and other NAR leaders argue the bill should be a major priority as both parties target an affordability message ahead of the midterms.
They also believe it’s possible given the recent passage of the bipartisan housing reform package, the 21st Century Road to Housing Act. That bill’s 50 provisions are aimed to cut red tape.
“Just like people were locked into their homes at lower interest rates, seniors are often locked in because of the home equity penalty,” Brown said. “This legislation expands existing housing stock and gives seniors the opportunity to tap equity that they have counted on for retirement.”
The current code, set in 1997, taxes profits from home sales at up to 20%, if they exceed the limit of $250,000 for single people and $500,000 for joint filers.
Because the capital gains tax exclusion wasn’t tied to inflation, many more homeowners today face a tax hit than they would have three decades ago. Typically, the longer they own the home, the larger the bill.
The bill would double the current exclusion limits to $500,000 for single filers and $1 million for married couples filing jointly, while indexing both thresholds to inflation going forward.
