Capital Gains on Homes Are Tax Exempt (see correction)

Tuesday, 11 December 2012 08:44

At least the first $250,000 of gains is exempt for individuals and $500,000 for couples. For this reason, the Post is likely off the mark in telling readers about middle class homeowners rushing to sell their homes to take advantage of the lower capital gains tax rate.

A couple would have to have a gain of at least $500,000 for this to be an issue. That would imply a gain that is a bit less than three times the median house price nationally. That doesn't sound like a middle class couple. Furthermore, the tax would only apply to the margin over $500,000. That means that a couple selling a home for a gain of $510,000 or $520,000 would be little affected by plausible rises in the capital gains tax rate since they would only pay the higher rate only on the amount over $500,000.

[Correction: The piece is clearly referring to investment properties. I was confused by the sentence:

"The new limit would hit the wealthy hardest, but in regions such as the Washington area that have high housing prices, it would also hit many homeowners who do not view themselves as rich."

However, the discussion before and after this sentence is obviously referring to investment properties which would be subject to the capital gains tax.]