In Rhode Island, 47.2% of homeowners have accumulated home equity surpassing the federal capital gains tax exclusion. Nearly 89.2% exceed the $500,000 threshold for married couples, risking high taxes when selling. The federal exemption has remained unchanged since 1997 despite home prices rising by over 260% nationally. Capital gains are taxed in Rhode Island as income, leading to significant selling costs. This situation has caused a "stay-put penalty," where older homeowners avoid selling, restricting housing supply in the market.
Nearly half of Rhode Island homeowners could face a surprise tax bill upon selling their homes due to accumulated equity exceeding federal capital gains tax exclusions.
According to the National Association of Realtors®, 89.2% of homeowners in Rhode Island have exceeded the $500,000 threshold for capital gains tax, signaling a looming financial burden.
Capital gains, taxed as income in Rhode Island up to 5.99%, combined with federal taxes, can greatly reduce homeowner profits, sometimes by tens of thousands.
Rising home values have resulted in a "stay-put penalty," discouraging older residents from selling and exacerbating housing supply constraints in a limited market.
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