Idaho's soaring home values have led to many homeowners becoming millionaires on paper, yet over half may face capital gains taxes due to outdated federal exemptions. Designed in 1997, these exclusions of $250,000 for individuals and $500,000 for couples have not adjusted for inflation, leaving many homeowners subject to taxes on gains. Housing prices have surged over 260%, with homes in Idaho's popular markets pushing average sellers over those limits. Idaho taxes capital gains as ordinary income, resulting in possible significant tax bills for sellers above exemption thresholds.
According to the National Association of REALTORS®, 54.9% of homeowners in Idaho have built up equity exceeding the $250,000 exemption for individual filers.
The federal capital gains exclusion was created in 1997 to help protect homeowners from taxes on profits from the sale of their primary residence, but the limits have never been adjusted for inflation.
In hot Idaho markets like Boise, Coeur d'Alene, and Meridian, price appreciation alone is now enough to push average sellers over those outdated thresholds.
The average homeowner exceeding the exemption in Idaho stands to be taxed on $162,121 beyond the $250,000 cap.
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