"In 1997, the federal government created the capital gains exclusion to shield typical homeowners from taxes on the sale of their primary residence. Sellers could exclude up to $250,000 in profit-or $500,000 for joint filers. But those limits were never adjusted for inflation."
"Had the exemptions kept pace, they'd now exceed $660,000 for individuals and $1.32 million for couples. Instead, longtime Illinois homeowners are learning that capital gains taxes on home sales may apply even to modest, middle-income homes."
"More than 424,000 Illinois homeowners are already over the $250,000 exclusion limit, and 82,500 are beyond the $500,000 cap. These aren't just wealthy households."
"Illinois further taxes capital gains as regular income, at rates up to 4.95%. That means a federal tax bill could be compounded by a state one, especially for owners with long-term appreciation."
Homeowners in Illinois are experiencing unexpected financial repercussions when selling their homes, attributed to outdated federal tax policies. Currently, 12.5% of homeowners exceed the $250,000 capital gains exclusion, with an additional 2.4% surpassing the $500,000 limit for couples. Since 1997, home values have increased significantly, but the capital gains exemption limits have not adjusted for inflation. This situation means that many long-time homeowners, often with middle incomes, are now liable for capital gains taxes. Illinois also taxes capital gains as regular income, compounding the financial burden for these owners.
#home-equity-tax #capital-gains-exclusion #illinois-housing-market #federal-tax-policy #real-estate-taxation
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