A congressional bill would double the current capital gains exclusion. Some say this will help boost the inventory of homes for sale.
The number of homes on the market is a third below normal in Southern California mainly because of high mortgage rates. But some believe capital gains taxes also contribute to a shortage of homes for sale. A million dollars couldn’t entice a Fountain Valley woman to sell her house of 40 years even though she’d rather down-size and move closer to her children and grandchildren.
But skyrocketing home values exposed more people to the tax because the exemptions haven’t changed in the past 26 years.When the exclusion was adopted in 1997, the median house price was just $129,000 nationwide and $186,490 in California, Realtor figures show. As of August, the U.S. median had tripled to $407,100, and the California median jumped five-fold to $859,500.
The California Association of Realtors hailed the bill as a possible solution to the lack of housing. In a separate analysis, CAR determined the bill could shield two-thirds of homeowners now exposed to such a tax.Called the “More Homes on the Market Act,” the measure would increase the capital gains exclusion from $250,000 to $500,000 for single filers. For married couples filing a joint return, the exclusion would go from $500,000 to $1 million.
The bill has drawn support from 27 co-sponsors from both parties, including Democratic Reps. Katie Porter and Ted Lieu and GOP Reps. Mike Garcia and Michelle Steel. Mission Viejo accountant Mark LeWinter believes the cost of the tax is more than offset by the profits homeowners reap.
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