Realtor.com ran an exciting story headlined, “Marjorie Taylor Greene Shares Plans To Eliminate the Home Equity Tax: A ‘Gift to the American People.’” On Thursday, Representative Greene (R-Ga.) introduced the No Tax on Home Sales Act, a bill to eliminate the federal capital gains tax on the sale of a primary residence.
This is how you do it. Nibble away at the taxes one tiny bite at a time. Tips, Social Security, overtime, and now, hopefully, capital gains on homestead sales.
If you’ve never run into it, this particular tax is one of the most hated and feared taxes around. When people finally sell their homes —very often retired seniors— they are often horrified to discover that the United States government wants a big piece of the action. When you sell, every dollar above what you paid gets taxed as capital gains income (subject to complicated exceptions that don’t apply to most people).
Since primary homes are most Americans’ largest investment (guilty), and since real estate values slowly appreciate —if for no other reason than inflation— if you keep your home longer than five years, you almost certainly get hit with the tax. The longer you stay in your home, the bigger the ultimate tax bill gets.
Some people get house-locked —trapped in aging homes, unable to move closer to grandkids or downsize— because they can’t afford the IRS’s cut. If they’ve already taken money out, such as through home equity loans, the taxes could even exceed whatever they net from the sale. Even if they walk away with a little cash after tax, it’s often not enough to buy a new house— especially in today’s market.
Greene said, “They just say it’s not worth it for people to pay that capital gains penalty and then not be able to replace the home they have.” Her bill is refreshingly simple. It is one sentence: “Gross income shall not include gain from the sale of a principal residence.”
By limiting her new proposed tax exemption to principal homesteads, Greene smartly excluded real estate investors and flippers. That makes her bill much more politically palatable. Democrat retirees own homes, too.
It’s political genius, especially as the midterm battles heat up. It drives yet another wedge into Democrats’ coalition— this one between the anti-wealth activists and retirement-age homeowners. Even Bernie Bros have Boomer parents.
Let me know what you think.
