Mansion Owners Rushing to Sell Homes in Fear of Impending Capital Gains Tax IncreaseNovember 29, 2012
If there’s anything that both the rich and middle-classes have in common, it’s personal detest of paying taxes. And with reports on a capital gains tax hike scheduled by Jan. 1, owners of million-dollar properties in Miami are scrambling to get their residences sold beforehand.
Real estate agents have numerous clients who are currently looking to put their houses up in the market as soon as possible, as the tax increase would mean two very different prices before and after the end of this year.
The Bush Era provided a nice tax break – where capital gains taxes were set to a minimum of zero percent – these will be taken out of the picture. Replacing these favorable figures is a new standard minimum of ten percent federal tax on long-term gains, while the cap will be raised from fifteen to twenty percent.
Simple math tells us that the government will take huge chunks from sellers within the residential market. Moreover, the wrath brought to the properties market won’t just be felt by owners of the premier dwellings ranging from a million dollars and beyond, but by every single home seller as well.
Once an individual sells his abode, he’ll immediately be taxed on the profits he made. This tax rate shall is to be based on the duration of which the seller owned his dwelling, its purchase and sale price, as well as the magnitude of renovations (if any.)
“No one really knows what’s going to happen next, but some people are looking to sell,” says Oren Alexander of The Alexander Group and Prudential Douglas Elliman.
“The real estate market has increased in New York City in the past two years, and their properties are worth more than they paid. So people are going to rush to sell property before the year ends.”
Contrary to the idea of rich folks doing themselves a favor by selling their residences before the capital gains tax hike hits, CNBC’s Robert Frank feels that this trend may actually end up counterproductive for them instead.
He explains that as more and more owners of Miami luxury properties list their houses, the residential market would immediately see an increase of inventory during this month and the next, in turn causing a decrease in the prices of properties at the market’s top portion. This’ll gradually place more pressure on sale prices, which is something sellers probably wouldn’t like to happen.