Hello Bloggers – Thanks for stopping by today. I hope you are doing great. Are you getting excited about the election? Many are, because they feel “change is in the air”. Whatever candidate wins your vote on or before November 2, it is important to vote and enjoy the rights and freedoms we have as Americans.
What I’d like to write about briefly is your home’s value and how what your home could be affected by the coming election. One of the strongest forces in the real estate market place that has caused your home to gain in value in the past 8 years has been current tax laws and exemptions. The current Capital Gains Tax law states that any homeowner that has owned and lived in their primary residence for 2 out of the past 5 years can sell that home and will NOT be taxed on the capitol gain. Another words, a single person that has gained home value up to $250 above what they paid for their home can sell that home with “0” tax due to the US government. A married couple can do the same thing – up to $500,000.
I believe this has been an incredible strength and stabilizer to the real estate market as a whole. There is no doubt that this has helped the upper end markets thrive. Why would I think this? Because many home buyers that I’ve worked with have decided to purchase a larger home and/or a more expensive home based on our current capitol gains tax laws. When upper end homes are built, carpenters work, appliances are bought, plumbers work, sales people work and a large portion of the economy “moves” forward. Statistics prove that when a home is built – 1000 people directly benefit. It’s a “good thing”. Real Estate is such a large portion of the economy and this tax incentive was a huge boost for the real estate industry and for your homes value.
Will people still buy bigger home? Yes, likely so, but there is no doubt in my mind that the reinstatement of capitol gains on real estate sales will dampen an already slowing market. So why will the election matter? Senator McCain’s plan does not propose any change in existing home sales income tax. This stance, in my opinion, will help our market’s bounce and stabilize sooner. Senator Obama’s plan calls for 28% tax on all profit from ALL home sales. If you sell your home and make a profit, you will pay 28% of your gain on taxes. If you are heading toward retirement and would like to down-size your home or move into a retirement community – 28% of the money you make from your home will go to taxes. This proposal will adversely affect the elderly who are counting on the income from their home as part of their retirement.
Less you think I am another greedy capitalist, at least hear my own families experience. My Mom and Step Dad retired years ago and lived in the mountains of North Carolina. When their health failed they were forced to sell their home and come to Raleigh, North Carolina to be close to family (me!). My Mom’s house was worth approximately $138k. They had purchased the home 15 years ago for around 40k. Being very frugal “Depression Babies” they had paid off their home. Both worked in a factory and never earned over 26K in one year’s time in their whole life. Because they sold that home over a year ago, they did not have to pay capitol gains on their primary residence and were able to use that money for housing and other pressing retirement needs. If Senator Obama wins the election, they would have paid over $30,000 to the government. That would have decreased their retirement next egg by nearly 30%. My parents worked all their lives and they worked hard. They deserve the full equity they had gained in their home.
This is only a small aspect of a whole list to consider when you vote this year. But it is an important one for the American home owner to understand.
Thank you for stopping by and God Bless! Go buy some real estate – it’s “on sale”.