Arizona homeowners are bumping up to capital gains limits. Here's what to know
A 1997 federal capital gains rule raised limits for what homeowners can earn on a sale without paying extra taxes. Joint filers can pocket $500,000 before paying capital gains.
The National Association of Realtors, which did a study on how many homeowners could have to pay more taxes due to higher stakes in their houses, is backing bipartisan legislation to raise the limits. And it would be a big increase that could save some homeowners a lot of money.
Rising home prices have more homeowners edging above the existing tax limits.
The capital gains tax, which can be as high as 20% depending on a homeowner's income, may be deterring some sellers and contributing to a slowdown in the housing market, according to housing analysts.
About 10% of Arizona homeowners have exceeded the $500,000 equity cap.
Nationally, 34% of homeowners, or approximately 29 million, could already have enough equity in their homes to exceed the $250,000 cap, and over 10%, or around 8 million, could have more than $500,000, according to NAR.
Bipartisan federal legislation called the More Homes on the Market Act has been introduced. The legislation would double the capital gains limits.
The capital gains exemption can only be used every two years on primary residences.
There are ways to defer capital gains that involve reinvesting. Accountants and financial advisors can offer advice.
This article originally appeared on Arizona Republic: More Ariz. homeowners bumping up to capital gains limits. What to know
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Time your sale wisely If your home's value has shot up, and you're nearing the exclusion limit, consider holding off until you've lived there long enough (two out of the last five years) to qualify for the full exclusion. Or, if you're engaged, selling after you marry could double your exclusion. Should capital gains tax rules change? 'The current federal policy on capital gains taxes is steadily and quietly distorting the housing market, locking in older homeowners, and strangling inventory just when America needs it most,' NAR's report states. Admittedly, the capital gains limits haven't been changed in close to three decades. In response to the growing number of homeowners nearing the limits, several members of Congress, including Rep. Marjorie Taylor Greene (R-Ga.) and Rep. Jimmy Panetta (D-CA), have proposed eliminating capital gains taxes or at least raising the home-sale exclusion amounts. 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