Capital gains tax: Another hit to homeowners

Published: Saturday, May 31, 2025 at 2:00 pm

Capital Gains Tax Bite: Homeowners Face Unexpected Tax Bills

California homeowners could be in for a surprise when they sell their homes, thanks to a combination of rising home values and stagnant capital gains tax exclusions. This issue, highlighted by recent economic trends, could lead to unexpected tax liabilities for many.

The article points to the impact of inflation, particularly during the Biden presidency, which significantly increased the cost of living, including housing. While rising home values have boosted home equity, especially in California, this also creates a potential tax burden.

Currently, homeowners can exclude up to $250,000 in capital gains from the sale of their primary residence, or $500,000 for married couples filing jointly. However, these exclusion amounts haven't been adjusted for inflation since 1997. This means that as home values increase, more homeowners are likely to exceed these limits, resulting in taxable capital gains.

The article emphasizes the importance of keeping detailed records of home improvements, as these expenses can be added to the cost basis, reducing the taxable gain. Homeowners are urged to consult with tax professionals before selling their homes. The author, Jon Coupal of the Howard Jarvis Taxpayers Association, advocates for legislative action to increase the exclusion and incorporate an inflation adjustment.

BNN's Perspective: This situation highlights a growing concern for homeowners. While rising home values are generally positive, the failure to adjust tax exclusions for inflation creates an unfair burden. It's a complex issue, and a balanced approach is needed. While tax revenue is important, policymakers should consider the impact on homeowners and explore options like indexing the exclusion to inflation to provide relief.

Keywords: Capital gains tax, homeowners, California, housing market, inflation, home values, tax exclusion, primary residence, capital gains, tax liability, home equity, tax planning, property taxes, Jon Coupal, Howard Jarvis Taxpayers Association, real estate, selling a home, tax implications, federal taxes, state taxes.

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