More Homes on the Market Act - What Homeowners and Real Estate Investors Should Know
Congress is considering legislation known as the More Homes on the Market Act, which is intended to encourage more homeowners to put their homes up for sale by reducing the potential tax cost of selling an appreciated residence.
The legislation is not yet law. Its provisions could change, and the bill may not ultimately be enacted. It is still worth watching, because it could create valuable tax-planning opportunities for homeowners.
A Larger Tax-Free Gain When Selling Your Home
Under current law, Section 121 generally allows qualifying homeowners to exclude from federal income tax up to:
$250,000 of gain for single taxpayers
$500,000 of gain for married couples filing jointly
These limits have not kept pace with the substantial appreciation in home values experienced in many areas of the country.
The proposed legislation would increase the amount of gain that qualifying homeowners could exclude, potentially allowing more people to sell highly appreciated homes without paying federal capital gains tax on the entire profit.
As currently drafted, the bill would double the exclusion to $500,000 for single filers and $1 million for married couples filing jointly, and would index those amounts for inflation going forward.
Why Could This Be Important?
For homeowners who have owned their homes for many years, a higher exclusion could mean:
More tax-free profit when selling a primary residence
Greater flexibility for homeowners considering downsizing, relocating, or moving into retirement
Less hesitation to sell a highly appreciated home because of the potential tax bill
For some longtime homeowners, taxes can be an important factor in deciding whether to sell. Increasing the exclusion could make selling more financially attractive.
What Could This Mean for You?
If Congress ultimately expands the Section 121 exclusion or makes other favorable changes affecting real estate transactions, homeowners and investors may have new opportunities to reduce or defer taxes.
The key will be planning before the sale takes place. Depending on the final legislation, tax planning could include evaluating:
The timing of a home or investment-property sale
The amount of taxable gain
Qualification for the Section 121 home-sale exclusion
Whether a 1031 exchange should be considered
The effect of depreciation recapture
State income-tax consequences
How a sale fits into your overall retirement and investment strategy
Important: This Is Not Yet Law
The More Homes on the Market Act is proposed legislation. Its provisions may be modified substantially during the legislative process, and there is no guarantee that it will become law.
For that reason, homeowners and investors should not make a sale or investment decision based solely on the proposed legislation. We will continue to monitor developments in Congress and keep our clients informed of significant changes.
Thinking about selling a home or investment property? Contact our office before the sale so we can review the potential tax consequences and identify planning opportunities while there is still time to take advantage of them.
IRS Improves Business Tax Self-Service Platform
More Online Tools Are Now Available for Business Owners
Dealing with the IRS hasn't always been easy, especially when getting an answer meant spending time on the phone or waiting for correspondence in the mail. The IRS continues to expand its online services for businesses.
Earlier this year, the IRS expanded access to its Business Tax Account, an online self-service platform that allows eligible business owners to access and manage important federal tax information in one place. Access has been expanded to include additional types of businesses, including partnerships, S corporations, and certain LLCs.
What Can You Do With a Business Tax Account?
Depending on the business and the user's authorization, the online account can provide access to information such as:
Tax balances owed to the IRS
Payment history
IRS notices and letters
Eligible tax transcripts
Business information the IRS has on file
Other federal tax account information and services
Having this information available online can be especially helpful when you need to verify a payment, check a balance, locate a tax record, or review information without having to call the IRS.
New Payment Plan Features
The IRS has continued improving the Business Tax Account by adding additional tools. One important enhancement involves existing IRS payment plans. Eligible users can now access more information about their payment arrangements directly through their Business Tax Account.
This includes the ability to:
View the remaining balance on an existing payment plan
Make payments toward the balance
Review additional information about the payment arrangement
For business owners with an IRS balance, these features can make it much easier to monitor and manage their tax obligations.
Why This Is Good News for Business Owners
Many routine IRS matters have traditionally required a phone call, written correspondence, or assistance from a tax professional. The continued expansion of the Business Tax Account gives business owners another option. Instead of waiting until normal business hours to contact the IRS, eligible taxpayers can access certain information online and on their own schedule.
That doesn't replace the need for professional tax advice, particularly when dealing with IRS notices, unpaid taxes, penalties, audits, or more complicated tax matters. But it can make routine account management considerably easier.
Setting Up Your Business Tax Account
If you own a business, we encourage you to become familiar with the IRS Business Tax Account and the services available to you. The IRS continues to expand the platform, so additional features and capabilities are likely to become available over time.
Need help understanding an IRS notice, balance, payment issue, or other business tax matter? Contact our office. We're happy to help you determine the best way to handle it.
This information is for general informational purposes only and is not tax, legal, or financial advice. Your situation is specific to you. Talk with us before acting on anything here.
