WHATEVER YOUR political preference, if you're a homeowner -- especially in a higher-cost market -- you're virtually certain to emerge a winner on taxes from the 1996 presidential contest.
That's because both Bob Dole and Bill Clinton have proposed generous new tax benefits in their campaign planks. The odds are strong that some blended version of them will be included in congressional tax legislation next year no matter who wins.
But the proposals do have some important differences. And certain features are easy to misunderstand because they involve complex tax law issues. To help you figure how either plan might affect you at the bottom line, here's a point-by-point comparative analysis.
Both the Dole and Clinton programs would simplify one of the most vexing and costly issues for homeowners: capital gains taxation on a home sale. For the overwhelming majority of home sellers across the country, Clinton and Dole would provide an easy-to-grasp, potentially lucrative answer: If you rack up a profit on the sale of your house, don't worry about it. Your home sale profits henceforth will be free of federal taxation, unless they're exceptionally large.
Both the Democratic and Republican candidates are promising the nation's 66 million homeowners zero taxation on most home sale profits. Under the Clinton plan, capital gains taxation of home sale profits wouldn't even start for a married couple filing joint returns until the gain on a given transaction exceeded $500,000. Singles would have a $250,000 tax threshold.
Under the Dole plan, which would be effective Dec. 31 of this year, the threshold would be $250,000 for a married couple filing jointly -- unless they lived in their house over 10 years. At that point, they could exclude from taxation another $25,000 per year, up to a total $500,000 tax-free for couples who had owned their principal residence for 20 years. Singles would have a $125,000 initial threshold, and a $12,500 per year add-on exclusion for a total $250,000 per transaction.
In addition, both proposals would effectively negate the traditional rollover rules. Under current law, you have to buy a replacement home of higher or equal cost within two years of your sale. This would be an extremely significant change for baby boomers and anyone else who has built up a sizable equity and wants to downsize. Both plans would eliminate the current $125,000 one-time tax-free exclusion for homeowners 55 and older. Even if you and your spouse were just 30-somethings and experienced a $200,000 gain on the sale of your home, you could pocket it tax-free under either plan.
Pub Date: 9/08/96