Capital Gains Exemption on Home Sale Going Away?

J

Jim240

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Oct 18, 2007
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I figured out of all the places on the net that someone would know the answer to this one, it would be here! I was talking with a family member today and he told me that his accountant told him that in the bank bailout legislation that recently went through congress, there was also language that helped pay for the bailout by basically wiping out the $250k for single and $500k for married couples exemption from capital gains on sale of your home. This is supposed to go into affect first of the new year.

Anyone else heard anything like this??? I was told few people seem to know about it, that it's been kept pretty quiet and buried in the details of the bill. Frankly, I think I've been under a rock lately, so if I'm completely off base, sorry!

Thanks!
 
Currently, if you have lived in your house 2 out of 5 yrs and used it as a vacation property for three, you can get the full benefit of 250 or 500k. Under the new law in Jan, under those same terms, you will have to pay tax on 3/5's of the capitol gains. It will not affect you on your primary, full time home. SB
 
Unless Obama is elected.

He plans to eliminate all captial gains tax protections. If you believe what is published, his overhaul of the tax code will tax all capital gains as regular income.
 
The current law is not supposed to change. However, Mr. Obama in his economic plan wants to tax any gain on the sale of your principle residence at 28%. If he is elected, (and with a democratic house and senate) this could be the first time ever that the sale of your house would be taxed.

Prior to the current law you could exchange your house to a larger house without any taxable income.
 
I'm not an Obama fan, but I'm considering a 2nd home. This would have an effect on our tax plans, so you got my attention this morning.
 
Kameroo said:
I'm not an Obama fan, but I'm considering a 2nd home. This would have an effect on our tax plans, so you got my attention this morning.
Click to expand...

Are you thinking of buying that 2nd home prior to the first of the year? Yeah there are some sweet deals out there as developers unload inventory, but the latest forecasts I read show home prices in general are likely to drop another 10% or so before the inventory backlog is whittled down to more evenly match demand. Prices for second homes have been more volatile than those for primary residences, and the supply-demand balance varies widely from one market to another, and prices seem to have stabilized already in some areas.

In short, do your homework. Now it looks like proposed changes to the tax code are another subject for your studies.
 
Newbie said:
Currently, if you have lived in your house 2 out of 5 yrs and used it as a vacation property for three, you can get the full benefit of 250 or 500k. Under the new law in Jan, under those same terms, you will have to pay tax on 3/5's of the capitol gains. It will not affect you on your primary, full time home. SB
Click to expand...

Huh. I need to understand that better. It sounds a bit contradictory.

When you say it doesn't affect your primary, full time home: What does that mean relative to the 2 out 5 rule? I thought it only takes 60 (or is it 90) days to establish a primary residence?

i.e. why can't you move into your vacation home and claim it as your primary residence? If you change driver's license, mailing addresses. . .etc. . .etc. .. isn't that a good faith move? What is this "2 out of 5 years" nonsense?

As another example: If you sell your primary residence, then move into the vacation home, doesn't that become your primary residence 90 days later? I would imagine that if you DON'T claim capital gains relief on the first house, you can claim capital gains relief on the vaction home at the 90 day mark.


This example sounds crazy; but if you move to a different part of the country.. . .you could easily want to sell both properties in a short period of time.

- - - - - -

Note that the previous law did not fully exempt primary residences from capital gains. There was a $675 lifetime cap. i.e; if you got a $500K gain on house 1, the max you could exclude on house 2 was $175K. Of course, back before year 2000: If you had that much gains, you were in a different league all together!!

- - - - -- - - - -

I am not going to comment on the Obama/McCain tax plans. I think they are BOTH lying. As evidence: I present to you the simple fact that they are politicians and that their lips are moving.
 
comsnark said:
Huh. I need to understand that better. It sounds a bit contradictory.
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You are maing the common mistake of thinking that common sense and logic work when trying to interpret the tax code, which was written and amended ad infinitum by tax lawyers and politicians.
 
Let's not turn this forum into a political debate. Your claims are totally bogus.

fwebster said:
Unless Obama is elected.

He plans to eliminate all captial gains tax protections. If you believe what is published, his overhaul of the tax code will tax all capital gains as regular income.
Click to expand...
 
I think this will clear up what the actual changes are.
Read the entire article here http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20080818/REG/517913864/1009/news


When President Bush recently signed the long-anticipated housing bill into law, he took steps to stem the flood of foreclosures in the troubled housing market. However, the bill also contains a clause that drastically chops the amount homeowners can potentially enjoy in tax-exempt capital gains when they sell their homes.

"It was trying to close a very specific loophole, and as a result, it's going to affect a whole lot of people in a negative way," said John Olivieri, a partner at White & Case LLP in New York.
Prior to the bill's passage, homeowners could enjoy tax-free capital gains of up to $250,000 for a single person and up to $500,000 for a married couple if they used the home as their principal residence for at least two of the previous five years. However, the Bush administration has changed the law in an effort to crack down on abuse — a move that critics think could hurt average homeowners.
Under the revised law, which was buried in the housing bill, a homeowner can no longer enjoy tax-free capital gains from the home during the years it isn't the owner's principal residence. For example, if a homeowner uses the house as a vacation home for three years and as a principal residence for the next two, the owner will have to pay capital gains taxes on three-fifths of the gain — which represents the three years the home isn't a principal residence. Previously, the homeowner would have pocketed the entire capital gain up to the limit.
 
hmm, looks like he's not only going to stop the ice caps from melting, he's also going to disprove the laffer curve.
 
sailr said:
Let's not turn this forum into a political debate. Your claims are totally bogus.
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Pretty ballsy trying to set direction for the forum after only 4 posts. Congratulations you will be well received. I see lots of green in your future. Looking forward to more helpful postings!
 
I generally try and stay away from the political poop. Had/have enough of that every day as former State Rep but FrankW is correct. "The One" indicates he will raise almost ALL capital Gains " So we can pay our fair share". If you think income redistribution is Good then he is your man. There is no doubt our tax system needs help, but major tax increases is not the answer. I had to edit my post after I read it. It just gauls me that hard work, inovation, creativity, etc... There i go again, JC3
 
TurtleTone said:
hmm, looks like he's not only going to stop the ice caps from melting, he's also going to disprove the laffer curve.
Click to expand...

Hey! Don't go around disparaging one of the sacred texts! It's Laffer Curve with capital letters. Geez

Osama is a lawyer who never really worked. Probably thinks people with money got lucky in the lottery of life. Mr-never-took-a-stand-I-voted-present doesn't know crap about how the world works.

Best regards,
Frank C
 
Nah, you missed it
 
fc3 said:
Hey! Don't go around disparaging one of the sacred texts! It's Laffer Curve with capital letters. Geez

Osama is a lawyer who never really worked. Probably thinks people with money got lucky in the lottery of life. Mr-never-took-a-stand-I-voted-present doesn't know crap about how the world works.

Best regards,
Frank C
Click to expand...

Frank
According to some reports Obama and his wife have a net worth of $7 million. Maybe he could afford that COBALT Yacht you like so much :wow:. He is worth quite a bit more than me. Maybe I should start writing a book since that seems to be Mr Obama's main source of income. Do you think "Inside Secrets of CSR" would be a best seller?
http://mangoboss.com/ObamaNetWorth
 
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