{"id":113072,"date":"2021-04-28T15:32:52","date_gmt":"2021-04-28T15:32:52","guid":{"rendered":"https:\/\/fin2me.com\/?p=113072"},"modified":"2021-04-28T15:32:52","modified_gmt":"2021-04-28T15:32:52","slug":"how-bidens-capital-gains-proposal-may-hit-middle-class-home-sellers-in-red-hot-markets","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/how-bidens-capital-gains-proposal-may-hit-middle-class-home-sellers-in-red-hot-markets\/","title":{"rendered":"How Biden&#x27;s capital gains proposal may hit middle-class home sellers in red-hot markets"},"content":{"rendered":"<ul>\n<li>President Biden will propose a capital gains tax increase for households making more than $1 million per year. The top rate would jump to 39.6% from 20%.<\/li>\n<li>These changes may hit homeowners looking to sell in hot markets.<\/li>\n<li>Those affected can reduce their tax bill with planning, financial experts say.<\/li>\n<\/ul>\n<p>As home prices soar, some sellers in red-hot markets may face a costly surprise come tax time.<\/p>\n<p>President Joe Biden will propose in a nationwide address Wednesday a capital gains tax increase for the top 0.3% of households \u2014 those making more than $1 million per year.\u00a0\u00a0\u00a0<\/p>\n<p>But the proposal may also deliver a tax bill to those selling a home with significant gains.<\/p>\n<h2>More from Your Money, Your Future:<\/h2>\n<p>Here&#x27;s a look at more on how to manage, grow and protect your money.<\/p>\n<ul>\n<li>Why 75% of stock owners won&#x27;t be hit by Biden&#x27;s capital gains tax hike<\/li>\n<li>Latest batch of stimulus checks go those recently filing tax returns<\/li>\n<li>Advisors must meet the digital demands of young investors<\/li>\n<\/ul>\n<p>Wealthy Americans now paying the top capital gains rate could see a hike to 43.4%, from 23.8%. Both rates include a 3.8% levy on net investment income, created by the Affordable Care Act.\u00a0\u00a0<\/p>\n<p>The tax increases may impact more than stocks, bonds and cryptocurrency, however. Homeowners looking to cash in on sizzling home prices could also receive a bill.<\/p>\n<p>&quot;The proposed increase in federal as well as state capital gains tax rates could sting [home sellers] on the margins,&quot; said Sharif Muhammad, founder and CEO of Unlimited Financial Services in Somerset, New Jersey.<\/p>\n<h2>Tax exclusion<\/h2>\n<p>Even with median home prices reaching all-time highs, Muhammad said, many sellers avoid paying capital gains on home profits because of a special tax break.<\/p>\n<p>Single taxpayers can subtract up to $250,000 from their profits, and married filers may qualify to exclude up to $500,000. Anything more is subject to capital gains taxes.\u00a0<\/p>\n<p>There&#x27;s a strict IRS rule, though: It must be the seller&#x27;s primary home for two out of five years before closing on the sale, with a few exceptions, like a job- or health-related move.<\/p>\n<p>While many can save on capital gains taxes, home sales in high-dollar markets could bump some sellers over the $1 million income threshold in the year of the sale, especially without the exclusions.\u00a0\u00a0\u00a0\u00a0<\/p>\n<p>&quot;I don&#x27;t expect the law to impact a lot of people, but selling in some markets could put someone over $1 million in income for the year,&quot; said Leona Edwards, a Nashville, Tennessee-based certified financial planner and wealth advisor at Mariner Wealth Advisors.<\/p>\n<p>The Los Angeles area, for example, has seen a year-over-year increase of 24.8%, with the median list price at $1,199,000, according to data from realtor.com.<\/p>\n<p>Those who bought during dips over the past 20 years, like after the Great Recession, may be caught up in the tax hike.\u00a0<\/p>\n<p>For example, let&#x27;s say a single home seller earns $200,000 per year. If they bought a home for $250,000 and sold for $1.5 million, they could have annual income above the $1 million threshold, even with the $250,000 exclusion.\u00a0<\/p>\n<p>Combined with state taxes, the total capital gains rate could be more than 50% in California, a Tax Foundation report estimates.\u00a0\u00a0<\/p>\n<h2>Proactive tax planning\u00a0<\/h2>\n<p>Although some sellers may receive a bill, there are ways to reduce the burden.<\/p>\n<p>Before making a move, Edwards said, follow the exclusion rules when timing the sale.\u00a0<\/p>\n<p>&quot;You may get burned when you keep a home as a rental property and sell later on,&quot; she said.\u00a0<\/p>\n<p>Muhammad said sellers might slash their bill with so-called tax-loss harvesting, which uses some investment losses to offset gains.\u00a0\u00a0<\/p>\n<p>Sellers may also consider home improvements they have made, like renovations, that can reduce profits by increasing the home&#x27;s original purchase price, known as the &quot;cost basis.&quot;\u00a0<\/p>\n<p>Tax planning shouldn&#x27;t happen in a silo, however.<\/p>\n<p>&quot;Make sure you&#x27;re planning things out with enough lead time to help offset the windfall and potential tax ramifications,&quot; he said.<\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/04\/28\/how-bidens-capital-gains-tax-hike-may-hit-home-sellers-in-hot-markets.html\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>President Biden will propose a capital gains tax increase for households making more than $1 million per year. The top rate would jump to 39.6% [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":113071,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How Biden&#x27;s capital gains proposal may hit middle-class home sellers in red-hot markets - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/how-bidens-capital-gains-proposal-may-hit-middle-class-home-sellers-in-red-hot-markets\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Biden&#x27;s capital gains proposal may hit middle-class home sellers in red-hot markets - Fin2me\" \/>\n<meta property=\"og:description\" content=\"President Biden will propose a capital gains tax increase for households making more than $1 million per year. 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