Traditionally, real estate homeownership provided unequaled tax benefits. Now, it seems these tax benefits are about to be lessened somewhat.
A portion of the recently passed housing bill is raising some eyebrows and takes effect January 1. Prior to the bill's passage, homeowners could enjoy tax-free capital gains of up to $250,000 for a single person and up to $500,000 for a married couple if they used the home as their principal residence for at least two of the previous five years.
Under the revised law in the housing bill, a homeowner can no longer enjoy tax-free capital gains from the home during the years it isn't the owner's principal residence. For example, if a homeowner uses the house as a vacation home for three years and as a principal residence for the next two, the owner will have to pay capital gains taxes on three-fifths of the gain — which represents the three years the home isn't a principal residence. Previously, the homeowner would have pocketed the entire capital gain up to the limit.
Many thanks to our guest author, Mr.Greg Brooks Southwest area manager San Diego Mortgage Network for this enlightening post. A few our prior popular posts on the new housing bill were:
Federal Housing Bill Benefits Consumers who do not itemize their tax returns
Summary of the “Housing and Economic Recovery Act of 2008
There are scenarios where the homeowner is going to get shafted. What if a homeowner must relocate for a year to keep their job during that five years? What about the cautious owner who wants to try retirement in a different state but wants the option to come back? Not fair when applied across the board. San Francisco Family Law
Another posting suggested this is not fair to all homeowners. Nothing ever is. However, consider the case (of a real person I know)that moved into his investment properties, stayed for two years and then sold it, using the tax advantage. He did this at least three or four times. Except for a property or two, these investments were never his principal residence until he decided to work the system. LA Law
Historically it has been proven that one generally stays about five to seven years in a home. Hence, to all complainers, no matter what you will do well when it comes to selling. Hoodia Weight Loss Program
The Fed has used over half of its available bullets.. and we’re nowhere near the end of this crisis. Now they’re shooting bullets our way. Duck! San Diego Hotels
Lenin was (sort of) right! He just didn’t know why. The inherent contradictions in a capitalist society will destroy capitalism as you know it! The oppression and greed of banks and government will lead to massive dislocations in the economy. Acne Treatments
Real estate homes should be thought of as just that and not investments. Florida Bail Bonds Service
Are all “fifths” created equally when prices soared in some years and plummeted in others? San Diego Plastic Surgeon
What are they thinking? Oh yes, they are thinking they can take more of our money. Vegas Legal Advice
The smart homeowner buys and profits. The greedy government comes and takes it away. Is this the American way? Sad, but true. San Diego Family Dentistry
When the housing market is on a downturn it just doesn’t make any sense to take away incentives of home ownership. I agree with an earlier post, there are times an owner must rent out their home for awhile. Now they are penalized for their need. San Diego Real Estate