Index the homeowners capital gain exemption to inflation

Economy
1

The capital gains exemption was set to $500k 20+ years ago & never adjusted since.

That was a very high home price when it was set, but due to inflation has creeped lower down the economic scale of homeowners.

Adjusting it to today’s equivalent dollars & annually adjusting for inflation will encourage more older homeowners to downsize & open up more buying opportunities for younger buyers.

Will also create transactional economic activity for everything from moving to new, smaller housing (downsized) construction and will also unlock large amounts of equity that sits unused in the economy.

3 Likes
2

Agree 100%. When we sold our house in California after living there many years and paying off the mortgage early, we were hit with a huge capital gains tax. In effect, we were penalized for not maintaining a mortgage on our house. I.e., if the “equity” had been in our bank account instead of in the house itself, we would have paid less taxes on the sale. We had not factored in the capital gains tax when planning for retirement. Ouch!!!