More California homeowners could be incentivized to sell their homes and increase the market supply with the recently introduced “More Homes on the Market Act,” which would amend the tax code by increasing the sales gain tax exclusion to $500,000 for single filers and $1 million for joint filers.
The bipartisan bill, introduced in Congress by Rep. Jimmy Panetta (D-CA-20) and Rep. Mike Kelly (R-PA-16), ensures that homeowners can keep more of their nest egg when selling their homes, according to an official announcement.
Currently, homeowners who sell their home can only exclude $250,000 in gains from capital gains taxes, or $500,000 in the case of a joint-filing couple, an amount set in 1997 and not indexed for inflation.
This has had an outsized impact on California homeowners who face some of the highest housing costs in the nation, said the announcement.
“Due to outdated limitations on home sale gain exclusions, homeowners looking to downsize are discouraged from selling their homes, which can stifle our real estate market and contribute to a lack of housing supply,” said Panetta.
“Increasing this exclusion through the bipartisan “More Homes on the Market” Act will make it easier for homeowners to earn more from their investment, which will incentivize them to sell and increase the number of homes on the market. This legislation can help by providing a straightforward solution of amending the tax code to meet modern inflationary pressures.”
The passage of the act could have a dramatic impact in Pasadena, where the housing market has grown increasingly tight over at least the last five years.
“California realtors thank Congressman Panetta for introducing the ‘More Homes on the Market Act,’ which will provide the necessary tax relief for California homeowners, particularly senior citizens, who have been unable to move because of the onerous tax burden that could result if they were to sell,” said C.A.R. President Otto Catrina, a Bay Area real estate broker and realtor.
“For working Californians,” Catrina added, “a home is their biggest and most important investment. However, because the capital gains exclusion was passed 25 years ago with no indexing for inflation, fewer and fewer families have been able to downsize and access the equity built up in their homes. This has resulted in fewer homes being available for younger and first-time homebuyers to move into, which has driven up demand and home prices even more.”
According to an estimate from the National Association of Realtors, California, as many as 95 percent of single homeowners and 68 percent of married homeowners in California, who purchased their homes before 2000 could face capital gains tax if they sold their home this year.
