This is an important election coming up. For those that are full time in real estate it is important to know and understand the issues. It will mean the difference of is it smarter to own or rent? Even though I am in real estate, I have to stop and think of the consequences of my actions. For me that may come down to a client asking some advice, or deciding myself what is a good purchase or investment. This topic is troublesome. There are answers on the Internet that say they refute this but in actuality they do not. They defer it, because Congress writes the bills not the president. The president however can set a policy wish list or direction that he would like to proceed and Obama has.
For the past several years the capital gains of a home could be excluded if you met the requirements of primary residence, occupancy etc. 500K could be gained every 2 years tax free. If Obama is elected, he has already said the gains will be taxed as ordinary income at 28%. So the sale of a home with 500K in the future will be taxed and over 140K will be owed to the government. The question arises at a home at any price is why bother owning a home or purchasing a home as an investment if you will be taxed on the gain? Most real estate agents do not understand the dynamics of the business they are in. Taxation will kill our business and forever limit the chance to gain meaningful appreciation again until the tax laws would change sometime down the road again. Why would you vote for someone that has already said he is going to tax the sale of a home? He will return real estate to the stone ages with just this tax policy.
- Why invest if your already know your gains will be taxed at 28%?
- Why would you further risk your own money if there is no return after maintenance and taxes?
"When selling your primary residence, and live in it for 2 of the last 5 years - you can make up to $250,000 in profit if you're a single owner, or claim twice that if you're married, and not owe any capital gains taxes"
Obama's Economic Adviser - taxing the sale of a home.
I think the major pause in real estate right now is persons are afraid to commit right now until they know who will be elected, and what policies will dominate. You can't blame buyer's for being nervous right now to invest!
James Crawford ABR, Broker Associate
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