A quarter of California sellers now face capital gains bills
One in four California homeowners now pocket more than $500,000 when they sell their primary residence. That’s a profit that triggers a capital gains tax bill under federal rules that have not been updated in nearly three decades, according to new analysis from real estate data firm Cotality.
US home values have risen 147% over the past 15 years, per Cotality’s data, while the Internal Revenue Service’s Section 121 exclusion has stayed frozen at $250,000 for single filers and $500,000 for married couples filing jointly since the Taxpayer Relief Act of 1997. The result is a generation of homeowners who are, on paper, wealthy, but constrained in practice.
A coast-to-coast supply squeeze
The pressure is spreading beyond California’s borders. In Hawaii, 21% of sellers now exceed the exemption threshold. In Washington state, 19% do — despite median prices running nearly $100,000 below California and Hawaii, a signal that appreciation has been steep and compressed in those markets, according to Cotality’s findings.
