TAX PROPOSAL GIVES HOMEOWNERS BREAK.
Longtime homeowners who sell their houses could net a tidy profit thanks to modified capital gains regulations proposed in the new federal tax bill.
Congress still has to formally approve the tax bill, which President Clinton and congressional leaders agreed to late Monday night. But approval is expected, and its passage is likely to prod longtime homeowners into the real estate market.
Couples who sell would be exempt from taxes on profits up to $500,000; individuals would be exempt up to $250,000. Profits above those thresholds would be taxed at the new capital gains rate of 20 percent.
Under the agreement, that relief from capital gains taxes is good on any primary residence owned more than two years and it can be used whenever a residence is sold. It's retroactive to May 7.
``It's going to help those who have substantial equity in their homes,'' Jim Link, executive vice president of the San Fernando Valley Association of Realtors, said of the provision. ``It's for those homeowners who want to cash out of their property and enjoy a major capital gain.''
In the past, homeowners who sold did not have to pay capital gains taxes if they reinvested their profits in a house of equal or greater value within two years. Also, sellers 55 years or older received a one-time tax exemption on $125,000 in capital gains.
Home prices in the Los Angeles area have been in a general decline since the early 1990s so the new regulations probably won't bring immediate financial relief to anyone who bought a home here this decade.
The obvious benefactors are those homeowners who bought years ago when prices in the Valley area were in the mid to high five-figure range.
So the tax package could bring more of those homes onto the market.
``A lot of people who were thinking of downsizing their homes will decide to do so,'' predicted Congressman Brad Sherman, D-Woodland Hills.
In other words, the proposed tax change would benefit homeowners who already have raised a family and think that a smaller home might better suit their needs. But they have been reluctant to sell because of stiff capital gains taxes.
``This is really a bill of great significance to the people who bought their homes in the '70s and '80s,'' Sherman said.
David Flamer, a partner at Lasher, Flamer & Associates, a Woodland Hills CPA firm, said the new tax bill is good news for older homeowners who were thinking of selling, investing their profits and maybe moving into an apartment.
And Flamer thinks the new regulations could temporarily slow the rebound that has started in housing prices.
``People will put their homes on the market and that will have somewhat of a negative impact (on prices),'' he said. ``But this is not a temporary change in the law and after a period of time things will stabilize and continue on an upswing. We're still in a strong economic situation here.''
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Jul 30, 1997|
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