While it looks the tax compromise between the Republicans and President Obama will pass, I think the debate reminds us that the tax code is subject to change at anytime.
For real estate purposes, changes in the capital gains tax laws can have a huge impact on property owners in Vermont. Under the current tax code, when you buy or a sell a home in Vermont, you are subject to a number of potential taxes. One of thoses taxes is capital gains tax.
The capital gains tax is based upon the amount of gain you have in the sale of the Vermont real estate. For instance, if you purchase a home for $125,000 and sell it for $200,000, you have a gain of $75,000.
The current tax rate for long term capital gains is 15%.
Under the current tax code, a property owner's primary residence is exempt from tax if the gain is less than $250,000 for an individual or $500,000 for a married couple.
If the exemption was removed, the homeowner in the example above would owe a tax of $11,250 on the sale of the home in Vermont.
If the property is not the primary residence of the seller then the sale is likely subject to capital gains tax. If you are considering selling an investment property or already have your property under contract to sell, you may want to try to close prior to December 31st so you know what your tax liability on the sale rather than be at risk that Congress raises the rate.
