In New Jersey, 46.2% of homeowners have more equity than allowed for capital gains tax exclusions, with 12.7% exceeding the $500,000 threshold for joint filers. The capital gains exclusion levels have not changed since 1997, despite home prices rising over 260% nationwide, leading to unexpected tax liabilities. New Jersey taxes capital gains as income, reaching up to 10.75%, adding to the financial burden when selling homes. This has created a "stay-put penalty," where long-term homeowners avoid selling to evade significant taxes, constraining market dynamics.
Homeowners in New Jersey face significant tax bills due to home equity exceeding the IRS capital gains exclusion limits. 46.2% exceed $250,000 and 12.7% exceed $500,000.
The capital gains exclusion has not changed since 1997, leading to millions facing unexpected tax liabilities due to rising home prices, which have increased by over 260%.
New Jersey's high capital gains tax rates, topping out at 10.75%, further compound the tax burden for longtime homeowners selling in today's market.
The 'stay-put' penalty is affecting the Northeast, where homeowners are hesitant to sell out of fear of significant capital gains taxes, limiting market supply.
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