Some people have been studiously searching for positive aspects about the recent Housing Rescue Plan. As my regular readers know, I feel that this plan is an absolute bust in every way, and ultimately brings benefit only to the politicians currently in office, but not to any normal tax payer.
Here’s a case in point: For all of the praise this bill is receiving from some quarters, there’s a dirty little secret tucked into it that really screws normal, responsible home owners. Here’s how it works:
In the past, any home owner could purchase a piece of real estate and sell it without any capital gains taxes as long as the owner occupied the property for 2 of the past 5 years. This was a great thing, and allowed purpose-driven real estate investors to buy a property, move into it, fix it up, and sell it for a tax-free capital gain of up to $250,000 (or $500,000 if married filing jointly) every 2-5 years.
No longer.
There’s still a tax break. But it’s scaled back - and the reduction is potentially dramatic. It’s now based on some strange ratios of how long you’ve owned the property versus how long you’ve occupied it, etc. So now, getting to keep your own profits without taxes is going to be significantly more difficult and less likely than it has been in the past.
Keep in mind - this tax increase is aimed squarely at people who are responsible home owners and are in fact receiving a gain on the sale of their property. This is a perfect example of the government taxing the wise to fuel the stupid.
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