It has become clear that our old capital gains exclusion for the sale of people’s primary homes is badly outdated. With the rate of inflation we experienced over the last three decades, housing prices have skyrocketed to a level well above the $500,000 threshold. Thankfully, there is a bill supported by both sides of the political aisle in the House called the More Homes on the Market Act (H.R. 1321).
When the current capital gains exclusion for primary residences was introduced in 1998, property values were obviously far lower. Nearly thirty years later, homes have greatly appreciated with a significant spike coming in the post-Covid era.
So what’s the current policy? Under 26 U.S.C § 121, single homeowners are able to have no more than $250,000 of tax-free gains from selling their primary residence. For married couples, that number increases to $500,000.
Fast forward to 2024, where the value of homes has crossed the half a million-dollar mark statewide. Here on the Island, the median homee price in Nassau is $752,000 and over $600,000 in Suffolk!
To catch up with the times, it appears an update to the original threshold will have to be implemented. The bill is in its introductory phase in the Ways and Means Committee and is currently being supported by approximately three dozen congressional members.