Changes to capital gains tax laws are Needed
The Boston real estate market has no boundaries on pricing.
It’s free enterprise at its finest – no laws, no restrictions, and no limit on where prices can go.
With Boston housing prices increasing each year, should we revisit the capital gains laws.
Many local homeowners can say they’ve picked up another half-million in appreciation in just the last year or two, which provides one more hurdle to moving.
Their net profit exceeds $500,000, which means they are going to pay capital-gains tax if they move.
Nobody likes to pay tax to Uncle Sam – especially when it might be six figures!
We’ve seen it with the investment properties, for example. Long-time owners who paid a tenth of the money they can get today absolutely refuse to sell just because of the taxation. They could still reap hundreds of thousands or even millions in profit after paying the tax, but it irks them so much to pay the government that kind of money, that they refuse to consider it – and most consider it a shakedown.
It’s the same with residential. If you have to pay the government a big chunk of your profit in taxes, you’re going to think twice. It may even be the last straw, and end up being what prevents you from moving.
The 2-out-of-5 years exemption was created in 1997 and gives married homeowners as much as $500,000 in net profit, tax-free when they sell their home.
But in 1997, the median home price in America was around $170,000 – and today it is twice as much.
Shouldn’t we revise the rule to reflect the increase?
I think so.
Let’s double the exemption and make it $1,000,000 tax-free.
Politicians would need to agree that the lack of supply is killing the American Dream for the middle class. Without more homes for sale, the pricing will continue to climb until homeownership is beyond the reach of most people – which it already is in many areas.
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Updated: Boston Real Estate 2021
Changes to capital gains tax laws are behind housing price appreciation
Hello fellow economists.
Here’s a question for you. How much of an effect, if any, have the changes to the tax laws in 1997 have on the increase in housing prices over the past eight years?
Prior to 1997: gain up to $500,000 per couple exempt from capital gains taxes, if you are over 55 years of age
After 1997: gain up to $500,000 per couple exempt from capital gains taxes, no matter what your age.