High-end sellers are now racing against the clock: with the Bush tax cuts set to expire, and capital gains tax rates to go up on January 1st, you could potentially owe hundreds of dollars more in taxes on your next sale. The pressure to get your home closed before 2013 is high; and you may want to list your home now instead of delaying until next year or later.
The increased inventory on the high end may lead to a decrease in price, which could cause a ripple in the rest of the housing market. Experts are unsure if it would lead to a downward pressure on the rest of the housing inventory, but it could also increase sales volume.
The tax increase fears may be unfounded if additional legislation passes extending the tax cuts. The current tax rate for capital gains is 15%, but if it expires the capital gains tax will rise to 20%. This is in addition to the new federal health-care tax for couples who make $250,000 or more. As well, you may have to watch out for additional capital gains tax increases on a state and local level.
Capital gains are decided on the difference between the sales price and the original purchase price, less various deductions (like improvements). There is a $500,000 exclusion for couples who have used the home as a primary residence for more than two out of the past five years. However, the exclusion can be negligible on the high end. Please consider consulting an accountant for any tax advice.
If you are unsure of your home’s value or are deciding if this option is right for you, contact us today at 480-355-8645 for a free consultation!
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