The National Association of Realtors (NAR) is actively advocating for changes to the capital gains exclusion on the sale of a primary residence. It is called the More Homes on the Market Act and it could be a game changer. Here’s a breakdown:
- The Issue:
- The current capital gains exclusion amounts ($250,000 for single filers and $500,000 for married couples) were set in 1997 and have not been adjusted for inflation. The goal is to raise the limit to $500,000 for single filers and $1,000,000 for married couples. If you’ve lived in a house two out of the past five years you qualify for an exemption.
- Due to significant home price appreciation over the years, many homeowners now face substantial tax burdens when selling their homes.
- This can discourage homeowners from selling, contributing to a shortage of housing inventory.
- NAR's Stance:
- The NAR believes that the capital gains exclusion amounts should be increased and indexed for inflation.
- They are actively working to educate lawmakers on the impact of the outdated exclusion limits on homeowners and the housing market.
- They have supported, and will continue to support, legislation that will raise the exclusion amounts.
- The NAR tried to get an act passed in 2023 but it was turned down. Due to the shift in government this potentially could change.
- Why:
- NAR argues that increasing the exclusion would help to alleviate the housing inventory shortage by encouraging more homeowners to sell.
- It would also reduce the tax burden on homeowners who have seen significant appreciation in their home values.
In essence, the NAR is pushing for these changes to help ease the financial burden on homeowners and to stimulate the housing market. This could be great for both home buyers and sellers. It would help make more housing available for both first time home buyers and move-up buyers and provide homeowners with financial flexibility and incentives to sell their homes.
