Some home sellers have to have a sale contract inked prior to the end of 2017 in order to prevent a large tax bill that could be imposed if the Congress’ tax reform proposals become law: Both the House and Senate bills require sellers to have lived in their residence for a longer period of time before qualifying for the capital gains tax exclusion on the sale of a primary home.
Some sellers will need a contract in 2017 to protect themselves from big tax bill
As proposed, owners must reside in their house a minimum of five years out of the last eight; currently, the requirement is two years out of the last five.
The Senate form of tax reform includes an exception for transactions in which a contract is written before Jan. 1, 2018, even if the closing occurs later that year. In the event that exception makes it into a final bill that both the House and the Senate pass – and the president signs – any seller having a contract in hand by midnight on Dec. 31 will be safe.
However, the bill passed by the House includes no such exception. Because of this, homeowners who expect to sell but have lived in their current home under five years have only one month left to accomplish a deal before the proposed tax changes would take effect if the House’s take on capital gains taxes become part of the final package.
Should either version make it into the final bill, short-term homeowners who sell in 2018 will no longer qualify for the capital gains exclusion, which provides coverage for up to $250,000 for a person and $500,000 for a married couple. Because of this, the primary difference between these home sellers’ tax bill pre- and post-tax reform may very well be huge.
It won’t be known if the House or Senate version of tax reform is adopted until the bill is finalized, which may take place in a couple weeks. But sellers who haven’t lived in their home for longer than five of the last eight years should taking action immediately regardless of the version that’s approved, in line with the National Association of Realtors®.
Ready to find out the current market value of your home? Nick & Cindy Davis with RE/MAX Premier Group are here to assist you. We are always a just a click here away or call 813-300-7116
