TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, June 22, 2013

WSJ: Will Your Home Sale Be Tax-Free?

Wall Street Journal Tax Report:  Will Your Home Sale Be Tax-Free?, by Laura Saunders:

After years in the doldrums, housing markets are heating up in many parts of the country. That makes it a good time review the taxes—and the tax breaks—on home sales. ... Here is what sellers and sellers-to-be need to know.

  • The principal-residence tax break
  • Rental unit in the home
  • Repairs versus improvements
  • The new 3.8% tax
  • Sales at a loss and forgiveness of debt
  • Home-offic recapture
  • Home-buyer tax-credit recapture

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The complete lack of indexation of the $250k/$500k Section 121 exemption on sale of a primary residence is starting to bite hard in high-cost areas, including the suburbs of Washington, DC. When politicians have to hand over 40% of the increase in their home value above these amounts they may be inclined to begin indexing the exemption or return to the prior rules allowing deferral of gain when you buy a more expensive home.

In the meantime homeowners who can afford not to sell will simply buy a second home when they want to move. No sale = no tax revenue.

Posted by: AMTbuff | Jun 23, 2013 1:09:05 PM