Transcript:
Easan Arulanantham:
“Should I be looking to sell my house soon? I’m worried I’ll be penalized if I have a capital gain over $450,000.”
Tom Vaughan:
Yeah, so I think what that question is alluding to, is that the current reconciliation bill, as it stands, is looking to increase the capital gains rate from 20% to 25%, and above $450,000. And so that would make a difference, correct? I mean, if I sell my house now, before that happens, in theory, if they don’t go backwards. Sometimes they go backwards. If they make it retroactive for 2021, then it wouldn’t matter. But let’s assume they don’t make it retroactive, they have before. But if they don’t make it retroactive, then you’d have this choice of, “oh, I could sell my house now, before that.” So, first of all, that’s be the first thing I’d wonder about, ‘are they going to make it retroactive?’ Because it’s a huge differential. If they make it retroactive, then you can’t. It’s already it’s at 25 for everybody, including people that sold stuff in February. So that’s why I hate retroactive. But the one advantage of having retroactive taxes that everybody can’t run out and try to sell their homes all at once or sell property or stocks, which creates some selling pressure and brings the market down. Yeah, I would think if you were going to sell let’s say next January or February, and they told us in late November that you know the tax was going to go up, you might try to get that out there and try to sell it before then. But honestly, housing is not that easy to sell.
There’s a lot of things that have to happen sometimes too. Maybe some people will sell some of their stocks pay a little bit less capital gains. But a 5% increase, honestly, in my opinion, you got to be careful. I mean, just selling. Let’s say I have some great stocks that you love, and you’re going to sell it just to pay 20 instead of 25, you have to wait 31 days to buy that great stock back, or you’re going to buy something else. You could make less money, pretty easy,…and lose the 5% that you might… I don’t personally like the concept of taxation, making the reason for why you do things. Especially when it’s only a 5% differential, which I don’t think is enough to really be going out of your way for this. If you’re in the right, perfect scenario, think about it. But if you weren’t planning on selling your house, and then you would, because of a 5% difference? Where are you going to go? Are you going to make as much money on that house, as you’ve been making on your house? You can easily lose the 5% that you might be gaining, by selling early. And the other part of this is, we have just funded the government till early December. That just means very, very likely that this reconciliation bill, if it does get passed, in time to raise the debt ceiling, is probably going to be early December. But that’s just the way it works. I mean, there needs to be a hard deadline….
The government’s gonna run out of money if you don’t figure out how to make this bill. In order to get these things together, and so how much time are we going to have? Maybe with an individual stocks or different things, there are some things that I would definitely do. But we’re kind of… I would be looking at that as sort of more minor issues that you’re kind of working around instead of some huge decisions. A 5% is not enough difference, in my opinion, to, to really get aggressive in that area. …And honestly, we don’t know what they’re going to do, right? There’s been all kinds of talk. Lots of things have changed. Corporate taxes we’re going to be 28% are actually 35% at one point. That’s where they were, they were going to move it back to 28%. You know, and so and then 26.5%, now I’m hearing 25%. Who knows what it’s actually going to be …We’re going to the crucible of creating this. It could drop, it could disappear. I don’t know. Although, you know, there seems to be some cohesiveness around a 25% capital gains rate, but we’ll see.