For those Massachusetts home buyers that have benefited or will benefit from purchasing a home at prices at or near the bottom of the real estate market, they may have to share their good fortune with the Commonwealth of Massachusetts, if a proposal by Governor Deval Patrick is enacted by the legislature.
As part of a package of tax increases and the elimination of a variety of tax breaks, Governor Patrick hopes to raise $1.9 billion annually in revenue. One proposal is to eliminate the capital gains tax exemption on home sales.
Presently, Massachusetts follows federal tax law in exempting up to $500,000 in capital gains on the sale of homeowners primary residence. Governor Patrick's proposal to the eliminate capital gains exemption is in conjunction with raising the income tax from 5.25 percent to 6.25 percent, effectively raising the capital gains rate to 6.25 percent.
For example, if a homeowner sells a home after livng in it for a number of years for a gain of $200,000, that homeowner will have $12,500 in tax liability.
It isn't any surprise that the Massachusetts Association of Realtors opposes the elimination of the capital gains exemption for home sales. The trade oranization points to reduced equity in homes and a hit to the economy. In some cases, homeowners would not be able to move.
Governor Patrick also proposes the elimination of the lead paint and septic system repair/replacement tax credits.