In Michigan, a notable percentage of homeowners are facing unexpected capital gains tax bills when selling their homes due to many exceeding the federal exemption threshold. As reported, 15.4% of households surpass this limit, which was set nearly 30 years ago and has not adjusted for inflation despite a 260% increase in home prices. This situation is particularly pressing for homeowners in suburban areas where long-held family properties have appreciated significantly, leading to potential tax liabilities that could be substantial upon sale.
Approximately 15.4% of Michigan households now exceed the federal capital gains exemption. This is causing unexpected tax bills for those selling long-held homes.
Federal law allows only $250,000 exclusion for single filers and $500,000 for married couples, based on limits set in 1997 and not adjusted since.
With U.S. home prices increasing over 260% since the limits were set, homeowners are facing capital gains taxes that were not anticipated.
Michigan's capital gains tax stands at a flat rate of 4.05%, compounding the costs for homeowners selling properties exceeding tax exemption thresholds.
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