Tax Reform: Here’s What Could Impact Homeowners Most - Part 3

3. Preserved Exclusion of Capital Gains
This tax policy remains unchanged from the previous law, which stated that homeowners must live in their home for two out of the past five years in order to qualify for the exclusion.

“About 10 percent of home sellers last year sold their home after living in it between two and five years,” says Casey. “Keeping the status quo means these sellers no longer need to make that difficult choice, and can instead feel more free to list their home on a more flexible schedule without fear of a potentially hefty tax hit.”

The Senate bill proposed an increase to the residency requirement to five years of the past eight, but it did not pass to the final version.

“Today, homeownership is imperative for middle-class wealth-building and financial stability,” says Kirchner. “It allows people to invest in a long-term asset that pads their retirement savings, provides a safety net for unforeseen circumstances, and equity to back investment in education or small business. The survival of the capital gains exclusion means that the advantages of this type of investment will remain (except, of course, with regard to impact of changes to deductions).”

By Liz Dominguez