OK ted...the brain. Let me ask you this. Who's more likely to get the full $500k tax break? A poor person or a rich person?
Jeeze...when you knock on your head does it ring hollow?
Here is the law and its implications:
"The law exempts from taxation profits on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. To qualify, sellers must have owned and used the home as their principal residence for at least two of the last five years before the sale. Effective for sales after May 6, 1997, this new provision replaces the prior rollover provision on home sales and the $125,000 exclusion of gain for those 55 and over. There was no change in the rule that prohibits taxpayers from deducting losses on home sales.
This new $500,000 ($250,000 for singles) exclusion will not benefit those whose profit exceeds the limit. Compare these two cases:
Fred and Zelda are in the 31% tax bracket. They sold their primary residence for a profit of $300,000. Since the profit was less than $500,000, they pay no tax on the home sale.
Bob and Judy are also in the 31% tax bracket. They sold their primary residence for a profit of $600,000. They owe $20,000 in capital gains tax ($600,000 - $500,000 exclusion x 20%)."
filetax.com
Now in 90% of the markets in this country, whether you are poor, middle class or rich, you will be lucky to see a $500K gain in the sale of one's property AFTER 20 years of living in the same house.
In certain of the remaining markets, its possible that after 2-3 years of living and improving a property, you might see a $200K+ [not profit]but gain. The gain must then be reduced by mortgage, tax and insurance payments plus any improvements done to the house to determine the person's profit. If the person/persons is lucky AND are professionals, they will walk away with $100K....for 2-3 years work. How many people do you think are doing that in any metro area? In fact, how many people do you think are taking advantage of the law by moving around every two years? Show me how federal revenues dropped after this bill was passed in 1997?
Let me just add......I turned a property 3-4 times in ten years........it is killer work. To make a sizable profit, you must buy a fixer at a very good price in a good location where the neighborhood is improving and then spend serious $$$ to upgrade it. This concept of buying a property, doing nothing, selling it three months later and making $100K is the stuff of fantasy. It may happen but flowers in Greenland are more common. |
