An Evaluation of the One-Time Capital Gains Exclusion for Older Homeowners |
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Authors: | Sandra Newman James Reschovsky |
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Institution: | Institute for Policy Studies, Johns Hopkins University, Baltimore, Maryland 21218.;Department of Consumer Economics, Martha Van Rensselaer Hall, Cornell University, Ithaca, New York 14853-4401. |
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Abstract: | This paper provides an evaluation of the one-time capital gains exclusion for older homeowners. This provision was largely intended to prevent large capital gains tax liabilities from locking older households into current, and possibly inappropriate, housing. We find the exclusion facilitates a modest number of moves, through not entirely of the downscaling type intended by Congress. Among beneficiaries, the distribution of benefits appears to be highly regressive. Modest benefits are also found to be enjoyed by the real estate and mortgage industries. Revenue losses are estimated and found to be significantly larger than estimates provided by the Treasury Department. |
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