North Dakota homeowners are facing a financial challenge when selling their homes due to capital gains taxes, with 16.7% exceeding IRS exclusion limits. As home prices have risen over 260% since 1997, many owners are stuck with outdated exemptions of $250,000 for singles and $500,000 for married couples. Selling may result in significant tax liabilities, causing many to hesitate, particularly in family neighborhoods. This "stay-put penalty" contributes to market inventory shortages, increasing competition and prices, while limiting available options for buyers throughout the state.
In North Dakota, 16.7% of homeowners now have more home equity than the IRS allows to be excluded from capital gains taxes, which is $250,000 for individuals.
The federal government has allowed sellers to exclude $250,000 in capital gains if single, or $500,000 if married, since 1997, but home prices have increased over 260%.
North Dakota homeowners who bought early are facing what experts call the home equity tax, as selling requires them to hand over a portion of their gains to the IRS.
Many aging or downsizing owners are delaying listings due to potential tax impacts, contributing to inventory shortages and driving up prices in family neighborhoods.
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