In Massachusetts, over 60% of homeowners may be affected by outdated federal capital gains tax rules, which haven't been updated since 1997. With home values rising dramatically, many homeowners exceed the $250,000 exclusion for single filers and $500,000 for couples. As a result, selling homes, even in modest neighborhoods, could trigger significant capital gains taxes. The state taxes long-term gains at approximately 9%, and many homeowners now face unexpected tax burdens due to the lack of inflation adjustments to exclusion thresholds.
More than 60% of homeowners in Massachusetts could face a hidden home equity tax due to outdated federal capital gains rules that remain unchanged for decades.
The capital gains tax exclusion, set in 1997, is not indexed to inflation. Today, the thresholds would exceed $660,000 and $1.32 million.
Massachusetts homeowners now face capital gains taxes even on modest homes, with median prices around $600,000 leading to average taxable gains significantly exceeding $250,000.
Homeowners who exceed the $250,000 exclusion threshold are now becoming subject to significant taxes on profits from home sales, affecting many who stay in their homes for years.
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