Selling a home is now so profitable that many more Americans are getting hit with an unexpected tax bill.
Roughly 8% of 2023 home sales brought windfalls over the $500,000 limit for couples to be exempt from capital-gains taxes, more than double the share in 2019, according to CoreLogic, a real-estate data firm.
More sellers are on the hook for taxes because of the huge run up in property values since the pandemic. While home prices surged, the limit on how much profit is exempt from taxes, meanwhile, isn’t indexed for inflation.
The tax hit is even more prevalent in states with high home values, such as California, where nearly a third of sales exceed the threshold. In West Virginia, less than 1% of home sales are affected.
The prospect of a big tax bill gives homeowners one more reason to remain hesitant to sell. High interest rates and elevated home prices, along with a shortage of appealing homes to move to, have led many Americans to hold off listing their homes, financial advisers said. Others don’t have a choice.