GOP Tax Bill Retains Exemption of Gain on Sale of a Personal Residence

GOP Tax Bill retains law regarding gain on sale of a personal residence.

Lawmakers make it almost impossible to find updates about the gain on sale of a personal residence. But oh, my lanta, the good news is the law remains unchanged. The Republican Conference Committee released the final draft of the GOP Tax Bill last night at 5:30, Eastern Standard Time. Friday night, when everybody’s headed off to Christmas parties, sounds like an excellent time to release a substantial overhaul of our current tax system. It ensures every American citizen will find the time to read the 1,100 page document, ha, ha.

Out of all the disagreements between the Senate and House versions, there was one particular inclusion in both bills causing the most trauma for my home sellers in Sacramento. The exemption of gain on sale of a personal residence. A CPA from Roseville called, almost in tears over it. She cried: why isn’t this front page news? I found one article from NAR that explored the proposed changes in depth. Based on NAR statistics, the report concluded that changing the law would affect 620,000 transactions.

Present law that exempts gain on sale of a personal residence allows sellers to flip a home every two years. Up to $250,000 of profit for an individual or $500,000 of profit for a married couple is exempt from taxation when selling a personal residence. The other qualification is a homeowner must live in the home for 2 out of the last 5 years. A taxpayer can take this exemption once every 2 years. Welcome news for flippers and sellers who want to move up to a bigger home.

For some reason, both the Senate and House bills changed that law to apply to only sales of a personal residence every 5 years. Those proposals would limit the occupancy to 5 years out of the last 8 years. And a person could exercise this exemption only once in every 5 years.

Fortunately, the Republican Conference Committee retained the original law and made no provisions for changing it. You can find it on page 108 of the PDF download from this link to the Conference Report of Tax Cuts and Jobs Act. Just search for “residence” and go to page 633.

If you’re considering selling a home in Sacramento, call Elizabeth Weintraub at 916.233.6759. Put 43 years of experience to work for you.

A personal thank you to my husband Adam Weintraub for his expert reporting assistance.