Some homeowners who've seen their home values soar are concerned a federal capital-gains tax on home sales will eat into their retirement.
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The Lede
Since 1997, home sellers have had to pay federal capital-gains taxes on profits above $250,000 for a single person and $500,000 for a couple. The policy was designed to target the most affluent. But because the tax isn't indexed for inflation and home values have climbed so much, it's begun to impact middle-income people too. Some older Americans who have retired or are near retirement told BI that the tax had deterred them from downsizing and that they feared it would eat into crucial savings.
Key Details
- The tax may be discouraging empty nesters from selling their homes to growing families, worsening a shortage of starter homes.
- The share of home sales subject to the tax has more than doubled in the past few years. In 2023, 8% of US sellers made more than $500,000 in profit on the sale of their homes.
- "What we know, anecdotally, is that people are feeling locked in," Selma Hepp, the chief economist at CoreLogic, said. "There are a good share of people for whom this is the only source of wealth savings."
