He’d revise the present $500,000 and $250,000 capital gains exclusions for profits on sales of home by joint filers and single filers, respectively. Under today’s rules, you can claim a tax-free exclusion once you’ve owned a home for two years out of the preceding five years and you can do so once every two years. Under Camp’s proposal, you’d need to own your house for five out of the preceding eight years to claim a tax-free exclusion and you could only exercise this privilege once every five years. Capital gains exclusions for home sellers with upper incomes — $250,000 a year for singles and $500,000 a year for joint filers — would be phased out altogether over a period of years.
Besides these, Camp’s tax bill would:
•End all deductions for local property taxes, which he considers subsidies for excessive spending at the local government level.
•Eliminate credits for owners who make energy-saving improvements to their homes.
•End penalty-free withdrawals from Individual Retirement Accounts to help fund first-time home purchases.
•Leave in limbo popular mortgage debt forgiveness tax benefits used by large numbers of short-sellers and foreclosed owners in the past several years. Camp’s plan is silent on extending the benefits — which are currently expired, awaiting extension — but in this case silence would be fatal.
•Kill tax federal tax exemptions for state and municipal bond programs used to fund mortgages for moderate-income families.
Bottom line: Though preliminary action on tax reform is at least a year away, homeowners need to grasp a sobering, emerging reality. To pay for a streamlining of the ballooning federal tax code and provide lower rates on income, there’s a chance that Congress will demand that you give up long-entrenched tax subsidies that have put home ownership on a pedestal, supported prices and sweetened the household finances of millions of Americans for decades.
Whoa. Didn’t we all assume that homeownership is politically sacrosanct? Right, but when the chief Republican tax writer in Congress proposes throwing out most of those perks, you’ve got to re-examine that assumption.
Ken Harney’s email address is email@example.com.
Washington Post Writers Group