We do not talk about finances. For exactly those reasons and other (conflict of interest, which is a criminal matter for both employees and volunteer board members. You seem to be ignoring me when I say that.
We do not (well did not, because I haven’t done this for about five years now) talk about capital gains taxes, property taxes or the deductibility thereof, state of federal income taxes, interest rates, crypto, nothing.
Because then we can sit in front of a board of inquiry or the AG’s investigator or the deposing attorney and say with complete confidence “I did not tell the complainant [complainant’s parent/uncle/aunt/etc] anything about taxes or financing with regard to their existing home or investments”
Anything else is madness, as should be obvious to anyone who has worked in these circles.
Okay, if saying “you should talk to your accountant about possible tax implications” is talking about taxes, or giving advice, I stand corrected. But if I had been told the very real advantages of moving (my father-in-law did this at 92 and it was immensely helpful) and then found after I sold the house I owed a huge tax bill, I’d be very upset.
Are there any negatives about moving which are discussed, or is all positive? And I am certainly not advocating anyone give estimates about amount of tax owed or anything like that. That would indeed be inappropriate. This is almost a “terms and conditions apply” kind of statement. I’m kind of having a hard time understanding why a “talk to your CPA” statement is problematic.
Any time they bring up their financial situation we refer them to their “CPA, Financial Advisor or trusted family members”.
I mean we may actually have used the words “talk to your CPA” but for some reason you guys seem to think I’m saying we didn’t refer them to their CPA.
What we are not prepared to say is “Talk to your CPA about ”. Maybe that’s what @Voyager wants us to say, and that’s more iffy. Because once we “warn” then about capital gains taxes, they are going to complain that we didn’t warn them that condo fees are not deductible.
People “cashing in” and people looking to simply transfer from one home to another are very different cohorts. Certainly, if I’m liquidating an asset as part of my retirement, I’m probably going to be okay paying gains on it. Just like me selling a stock or cashing out an IRA, I would expect to pay gains taxes on it. So doing the same with a home is palatable.
I would agree that this policy’s chilling effect is less on the downsizing empty nester and more on the mid-life, starting a family types looking to make a moderate upgrade who suffer the most from this policy.
Separate topic which probably should be a thread in and of itself:
I think most of these kinds of means tests for tax breaks should be done away with. They are counterproductive and are rarely indexed to CPI, the regional impacts are usually way out of whack. If you’re trying to motivate a behavior don’t try to pick and choose winners and losers since that’s not really the point.
The most notable recent example is the EV tax credit. If you believe that we should be encouraging people to transition off fossil fuels and into EVs, then you should not care at all who owns the car that’s getting swapped out. This tax incentive is not about the redistribution of wealth, it’s about changing behavior. It’s about lowering the nation’s carbon footprint. It doesn’t make sense to exclude people with a net income of $75k or people buying a premium EV costing over $65k. Perhaps those folks don’t NEED the tax break to afford the car, but you’re trying to convince them to buy an EV instead of simply buying another gas guzzling SUV, truck, or sports sedan.
I think the same rationale applies to real estate gains taxes. If the goal is to raise revenue or tax wealth, then implement a progressive tax on all sales. An arbitrary cutoff at some fixed number is flawed thinking at the most basic level. But I don’t really think that’s what it’s about. I think the goal is more esoteric, we want Americans owning homes for a whole host of social reasons. We want to increase inventory on available homes, so people of all classes have buying options. We want to control prices and manage inflation. If that’s the case, a person making a move from one primary residence to another should not be taxed on any gains, no matter how large so long as all of those gains are going into the purchase of the next home. Any net gains that go to their bank account can get taxed, but the next home purchase should be an unlimited offset. Limiting to primary residences allows you to exclude wealthy people with multiple homes, and it allows you to exclude speculators, flippers and corporate investors.
As was said upthread, if the goal is a wealth tax, then implement a wealth tax. Don’t try to sneak it in the back door in the form of a punitive and arbitrary gains tax on transactions. It’s the wrong tool for the job.
It’s also hitting the middle class where they have most of their wealth. Poor people likely pay very little in capital gains, and rich people employ buy, borrow, die.
And while people have mentioned maintenance and the like upthread, let’s not forget that someone who buys a $700k house right now (by NO means impressive here in Boston) on a 30 year fixed with 20% down is going to pay $700k+ in interest, assuming rates don’t come down. And while that interest is deductible, it’s only reduced by the filer’s marginal rate.
Right, and on re-reading I realize I didn’t put a fine point on it- it seems to me that if you’re going to tax that gain, the gain ought to be reduced but what are for most people substantial interest paid.
Very true. Though in the current political climate anyone earning $100k+ is treated like a wealthy robber baron. A vocal minority seems to not realize that in most metropolises (and any touristy spot) a $100K salary is barely scraping by. Owning an expensive home is not necessarily a sign of great wealth, it’s usually a massive liability. Are there people worse off? Of course. But these aren’t the people you want to treat like the enemy.
This topic is contentious and pertinent to homeowners and renters alike as home value, driven primarily by supply effects both groups. The housing market accounted for 16.7% of the US GDP in 2021, down .3% from in 1986 when the IRS assessed the current $250,000 individual, $500,000/ married couple capital gain exemptions. Using the same year over year comparison, 1986 and 2021, in 1986 the median sale price was $95,000; in 2021 it was $424,000; a 449% increase. Median income was $25,000 in '86 and $71,000 in 2021; a 280% increase. States like CA, NY as well as Washington DC have seen much higher gains in value when compared to the rest of the US. Someone mentioned something to effect, paying tax on the gained value of one’s home is paying tax on the profit and while that statement is true, the discussion is the purpose of the Bill, not the tax generated or lost. The car example was laughable, very few people are biding their time waiting to buy a classic car while most are in fact trying to buy a home. The Bill’s purpose is to free up inventory, thereby making homes more affordable for first time and move-up buyers keeping the economy moving forward, not recessing as it currently is. Make no mistake, the increasing pace in home value and much slower pace of income growth will continue to increase the gap. We will continue moving toward a nation of renters doing the exact opposite of the “redistribution of wealth” the Left seems to hang their political hat on by making the wealthy wealthier.
A wealth tax which you only pay when you liquidate your assets is probably just about as regressive a wealth tax as you can make, no? The people who need the money and therefore sell their assets are the ones who get taxed, while the people who can afford to sit on them (or take advantage of a loophole that lets you reinvest the gains) avoid the tax.
I see your point. But people sell assets for many reasons. Someone selling into a bad market to raise needed cash is obviously someone for whom any tax is especially burdensome.
I’ve sold residences mostly becasue I didn’t want to live in them any more. Not becasue I needed to raise cash. Usually because I’m moving out of state. Certain folks might believe that retaining the house as in investment is a better move than selling it. Takes all kinds. My take is that being an out of state single-property landlord is a losing game.
Understand I’m not anti-tax in general, nor anti-capital gains tax. I’m just trying to understand, and help others understand, what’s connected to what here. And I’m pushing for people to use accurate terminology.
Taxing real gains might well be a good idea. It’s certainly a legit topic of debate. Taxing imaginary gains that are simply general inflation seems to me useless and stupid. Teasing out which gains are inflation and which are real would be a challenging exercise for non-portable non-fungible goods like real estate.
Not wanting to give people money who don’t actually need it is not the same thing as hating them. As you say, there are other people who are worse off. Why not subsidize them instead?
And, yeah, I don’t think you can argue these people need it. Let’s imagine they are these who make $100k and that this can in fact be barely enough to get by. These people own their own house, which eliminates the biggest cost of living increase of living in a city. And they are doing well enough that they are turning down the money they’d get to sell their six figure house because of what apparently amounts to a 5% loss.
And I’m not convinced that helping them out really helps the problem at hand. The issue isn’t just houses in general not being on the market. It’s housing that people can afford.