Thousands of Michigan homeowners are facing a costly surprise when they decide to sell. According to new data from the National Association of REALTORS®, 15.4% of households across the state now exceed the federal capital gains exemption—an outdated tax rule that hasn’t been adjusted in nearly 30 years.
This “hidden home equity tax” is a growing problem for longtime owners who bought modest homes decades ago but are now being penalized for staying put.
For those in Michigan, hoping to make a killing with selling their homes that have appreciated in value in the last few years, this is important information to consider before putting your home on the market. Because in truth, equity-rich owners across Grand Rapids, Ann Arbor, and beyond will feel the squeeze when it comes time to sell if the situation doesn’t change.
The tax cap that stalled out
Federal law allows homeowners to exclude up to $250,000 in profit from the sale of a primary residence if filing singly—or $500,000 for married couples. These caps were set in 1997 and never tied to inflation…