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Tax cut may spur the sale of houses

The kids have moved out. The income has slowed or stopped. And the housejust seems too big and empty.

Want to sell and move into a smaller home? You might want to wait justa little while.

In their budget pact this week, President Clinton and Congress have agreedto dramatically cut the capital gains tax, which taxes the profit home sellersearn in the sale.

If the agreement becomes law, that cut could boost home sales in SouthernOregon, especially of more expensive homes.

I think it will create quite a bit of activity, said CarleneHester, associate broker with Ashland Homes Real Estate Inc.

The capital gains tax is now 28 percent of any profit made, althoughsellers can exempt $125,000 of their profit. Senior citizens also have aone-time full exemption.

The agreement proposes increasing the general exemption to $250,000 foran individual or $500,000 for a couple. It would also decrease the tax rateto 20 or 18 percent.

Under the existing tax formula, people with expensive homes hesitateto sell and move into smaller homes because the profit they make will betaxable, said Charlie Wisdom, a sales associate with Advantage Realty andAssociates in Medford.

Under the agreement, people will be able to sell their house withoutjust getting dinged on taxes, he said.

It'll allow people to downsize, he explained. Thisgives them another avenue to do whatever they want.

The tax cut would affect senior citizens and high-end homeowners themost, said Cheryl Murray, president of the Rogue Valley Association of Realtors.

Both groups face relatively high taxes if they sell their homes and moveinto smaller houses.

Also, owners of less expensive homes usually don't have to worry aboutthe tax because they don't make more than $125,000 in profit.

And property values in some areas of Medford have increased by up to40 percent in the last decade, she said ­ catching some homeowners ina bad selling position.

But the agreement could also be good for Southern Oregon as a whole,said Bob Bills, a director of the National Association of Realtors. Housesare more expensive in other parts of the country, meaning people currentlyface taxes if they sell to move to Oregon, where houses cost less.

Now they'll be able to sell their homes and move to Southern Oregon,wherever they are, he said. That might spur our housing marketa little.

That idea works both ways, though, Bills said. High-end homeowners inSouthern Oregon could decide to sell their homes and move to Idaho or partsof Washington, where home prices are lower.

And, although the Medford area currently has its largest inventory ofunsold homes ever, local real estate agents don't expect a tax cut to furtherglut the market.

Home buyers always want to move up, they say ­ meaning expensivehomes usually find buyers. A capital gains tax cut would only free up morebuyers for less expensive and smaller homes.

It's going to assist everywhere, Wisdom said. Thisis something that's going to affect everyone all around. There's no reasonfor it not to create a lot of activity.