When Realtor.com® first exposed the hidden home equity tax a year ago, it looked like a penalty on patience.
The risk was most acute in places where decades of appreciation had pushed long-tenured homeowners past the capital gains exclusion for primary home sales—potentially exposing them to federal tax rates as high as 20%.
Now, new research from the National Association of Realtors® (NAR) suggests the home equity tax may also become a penalty on timing. In fast-growing markets, homeowners who bought before a recent price boom are coming very close to the exclusion limit.“What we are seeing is two dynamics happening at the same time,” explains Nadia Evangelou, senior economist and director of real estate research at NAR. “You have the high-cost markets where exposure is already very high, often affecting the majority of homeowners, and then you have the growth markets where exposure is rising quickly as prices increase.”…