Seventeen point seven percent of homeowners in Wisconsin exceed the federal capital gains tax exemption, risking a financial surprise when selling. Long-term ownership in a moderate market has pushed many homeowners into taxable territory. Federal law allows exclusions of $250,000 for single and $500,000 for married sellers, established in 1997, while home values have increased by over 260%. Average gains above the exemption in Wisconsin reach $89,566, leading to significant tax bills for many homeowners, particularly retirees on fixed incomes.
Federal capital gains law allows homeowners to exclude up to $250,000 in profits from the sale of a primary home- or $500,000 for married couples filing jointly.
In Wisconsin, the average gain above the $250,000 cap is $89,566. For the 2.6% of households who exceed the $500,000 threshold, the average taxable gain is $119,474.
A tax cap that time forgot: these exemptions were established in 1997 and haven't changed since, while home prices across the U.S. have climbed more than 260%.
For longtime homeowners, especially those on fixed incomes, the combined federal and state tax burden can add up fast as they face increasing taxable home equity.
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