In New York, a substantial number of homeowners, 46.1%, possess home equity that exceeds the capital gains tax exclusions allowed by the IRS. The exclusion amount has not changed since 1997, despite home prices increasing by over 260%, especially affecting those who have owned property for decades. The state’s top marginal tax rate of 10.9% further exacerbates the situation, creating a financial burden particularly for retirees looking to downsize or families selling long-held properties. This tax exposure is leading to a market phenomenon known as the 'stay-put penalty,' whereby potential sellers refrain from selling, resulting in tight inventory and increased competition for buyers.
In New York, 46.1% of homeowners possess home equity that exceeds IRS capital gains tax exclusions, leading to potentially significant tax liabilities upon sale.
The capital gains tax exclusion has remained unchanged since 1997, while home prices have surged over 260%, limiting its effectiveness for longstanding homeowners.
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