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Realtors: Tax change disrupts 620K home sales annually

One of the provisions of the pending tax overhaul —the tougher treatment of capital gains in home sales — could affect roughly 620,000 home sales annually, the National Association of Realtors (NAR) says.

Under the current law, a filer must live in the home for at least two of the previous five years in order to gain an exemption on capital gains that enables most sellers to keep all their equity. The House and Senate versions of the Republican tax overhaul bill propose to increase that standard to five out of eight years.

Based on its surveys, NAR says that from 10 percent to 22 percent of sellers owned their home from two to five years. The trade group also cited a Black Knight study that suggests that 14 percent of recent sellers own their home for two to five years.

“If 14 percent of buyers fall into this expanded capital gains definition, then roughly 620,000 home sales would be affected annually,” the trade group said in a blog. NAR predicted that if just 5 percent of homebuyers decided not to make a trade-up home purchase, it would mean a loss of 30,000 home sales annually.

The Joint Committee on Taxation estimated that changing the capital gains exemption would raise $800 million over ten years. NAR also disputed that, saying that the analysis doesn’t account for a loss of economic activity. 


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