Selling Your Longtime Home? What the Proposed Capital Gains Changes Could Mean for You
If you've owned your home for decades, you may have more at stake in a sale than you realize. Under current federal law, individuals can exclude up to $250,000 in profit on the sale of their primary residence from capital gains tax, and married couples filing jointly can exclude up to $500,000. Those limits haven't changed since 1997, while home values have more than doubled. For many longtime owners, that means a surprise tax bill, and some people put off downsizing because of it.
Congress is considering changes. The Nest Egg Protection Act (H.R. 9064), introduced in late May, would raise the exclusion to $1 million for homeowners 65 or older who sell a home they've owned for at least 25 years for sales from 2027 through 2030. A separate bipartisan bill, the More Homes on the Market Act (H.R. 1340), would double the limits for all homeowners to $500,000 for individuals and $1 million for couples and adjust them for inflation going forward. Neither bill has passed, and the current limits are still in effect. Both are worth watching as Congress wraps up its year.
There's also a Medicare connection many sellers don't expect. Medicare Open Enrollment runs October 15 through December 7, which makes this a good time to remember that your Part B and Part D premiums are based on your income from two years earlier. A large gain from a home sale can push your income high enough to trigger higher premiums, known as IRMAA, two years down the road. Timing and planning can make a real difference.
If you're thinking about selling in the next year or two, talk with your tax advisor before you list. Then give me a call, and we can plan the timing together.
As always, every situation is unique. For tax or legal questions, please consult your trusted attorney or tax professional. If you need a local, seasoned referral, I'm happy to help.
Sources: IRS Publication 523, Congress.gov, Medicare.gov
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