A new study finds that capital gains taxes may be quietly keeping homes off the market. I'm

Kathy Fedke and this is real estate news for investors. This is Real Estate News with Kathy Fedke.

An analysis from Flock Holmes is raising an important question for real estate investors and anyone holding real

estate that has grown significantly in value. What if selling a property creates such a large

tax bill that some owners would rather leave it vacant than put it on the market? According to their

analysis, in 49 U.S. metro areas, the tax hit from selling can be so high that some owners may come out ahead by simply holding an empty property for years.

So first, let's talk about how capital gains taxes actually work.

Capital gains tax is a tax on profit.

If you sell a property for more than you originally paid, that profit, minus the cost of capital

improvements and closing costs, is called capital gain.

If the home is your primary residence, meaning you've owned it and lived in it for at least

two of the last five years, the IRS gives you a big tax break.

Single homeowners can exclude up to $250,000 of profit.

Married couples filing jointly can exclude up to $500,000 of the gain. That means homeowners

who meet those IRS rules may be able to sell with little or even no federal capital gains tax.

But if your profit goes above those limits, the amount above that exclusion could be taxable.

Investment properties are different.

Rental properties, vacation homes, second homes, and land investments generally do not qualify for that primary residence exclusion.

So when investors sell, the gain is usually taxable.

And if you've owned that property for more than a year,

it typically qualifies for long-term capital gains,

which today can be as high as 20% at the federal level

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