Rising home values in Missouri have increased homeowner equity, yet over 10% face unexpected capital gains taxes when selling. Federal rules, unchanged since the 1990s, mean that many homeowners exceed the capital gains exclusion of $250,000 for singles and $500,000 for couples. Due to inflation, these exclusions have become insufficient, leaving numerous residents liable for taxes despite selling average-priced homes. Missouri's additional 4.95% tax on capital gains compounds the issue, creating significant tax liabilities for homeowners.
According to the National Association of REALTORS®, 14.3% of homeowners in Missouri now exceed the $250,000 capital gains exclusion for individual filers. Another 2.1% have surpassed the $500,000 limit set for married couples filing jointly.
The capital gains exclusion, designed in 1997, was meant to protect homeowners from being taxed on the sale of their primary residence. The limits-$250,000 for singles and $500,000 for couples-seemed generous then.
Nationally, prices have increased more than 260% since the exemption was set. If indexed to inflation, the thresholds today would exceed $660,000 and $1.32 million.
Missouri adds to the burden by taxing capital gains at its flat income tax rate of 4.95%. When combined with federal taxes, that means a meaningful portion of a seller's gain could go to the government.
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