<p>Yes. It’s still the case. A married couple filing jointly does not pay income tax on $500,000 of gain on the sale of their personal residence.</p>
<p>I suppose that a frugal retired couple could live off that sort of capital gain and any sort of nest egg they have. Retire at 60, buy a little house in some interior state (Arizona? Colorado?) and just live off an annuity. I mean, I can’t imagine that any of the parents on this site would be hard-pressed to find at least SOME sort of employment. </p>
<p>Or, better yet, cash out on Social Security-- I KID I KID. </p>
<p>But seriously, the AMT is a disaster. It’s another example of bad taxation ideas going even… badder.</p>
<p>Almost all families and individuals can avoid the AMT with proper tax planning in past years. I just sent my son some FAFSA data so I had last years tax return out and my federal tax was less than 10% on total income in six figures and I did not get slammed with an AMT penalty.</p>
<p>And yes Congress is in the process of amending this years AMT formula.</p>
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<p>Deductions?! I make squat as a TA, yet I still get taxed more heavily than 10%. Your kung fu is strong.</p>
<p>As an investment, home ownership seems grossly overrated. Over a 21 year period the value of my house has increased from $220K to about $440K. That is a pretty modest rate of return. That does not account for home upkeep which has included a new roof, a new furnace, new garage doors, a new fence, several thousand spent on tree removal and pruning. Nor does it include the roughly $10k in annual taxes. Nor does it include lots of my time which has gone into lawn/garden upkeep, mowing and leaf removal. I am overdue for a new driveway. Nor does it include pumping and maintenance on the septic system. My house is now considered to be a fixer-upper and is in need of an additional $30-50k to modernize and upgrade the kitchen and baths. I have backed that out of the house value, but even in good market, I will need to invest money in improvements in order to sell the house. Many of us who live in high cost areas are house poor and the return on that investment is very poor.</p>
<p>edad, I hear you. We are in a very similar situation. Our house is worth slightly more, and the purchase price was slightly less. We have invested in similar maintenance projects:2 new furnaces over 25 years, A/C unit replacements, painting, new siding and insulation, window replacements, new electrical upgrades, deck replacement, fence replacement, driveway maintenance, tree/branch removal, new sidewalks, roof replacement, new kitchen (old one was beyond a mess-this is an old home). edad, I think that you are underestimating the expenses in upgrading baths and kitchens. If you analyze the cost of kitchen appliances alone (range, oven, microwave + dishwasher can cost 4,000 for very average appliances and of course you can easily go to the sky is the limit. Ours ran 7,000, and we have a very nice, yet not the best, oven and microwave, but the rest is run of the mill. Do you know that the upper middle range for just a faucet can cost $500? If you want granite counter tops count on 3-5,000 in an average/nice sized kitchen if you are picking middle of the road granite-thickness and color/type. Then of course there is the flooring, cabinets, backsplash, lighting, etc). We will eventually need to upgrade our bathrooms and we got an estimate 2 years ago of 25k from a nationally known home center to redo one very small bathroom. This is not a bathroom that even has a bathtub, let alone a whirlpool bath. This is a barely can turn around bath with one shower. If we decide to expand the bathroom by 2 feet it will cost 30k. The biggest expense seems to be the tile work.</p>
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<p>This is so true. </p>
<p>Also, it is not just the property taxes, but the total picture (ie: very high auto and medical insurance premiums in our area). sigh…</p>
<p>NEMom: how true. My $30-50k estimate is for more basic upgrades and repairs and certainly would not cover gutjob renovations of the kitchen and bath. I neglected to mention that we already had to replace the frig, range and dishwasher. The kitchen floor was replaced by an insurance claim due to a leak in the upstairs bath. We also put in new but cheap laminated countertops when we bought the house. We do need to replace or reface the kitchen cabinets and replace some of the bathroom fixtures and counters. including a shower stall.</p>
<p>Oh, and according to what I just read 5 minutes ago, my property taxes can go up again. Why? It is because in NJ, Corzine has a new plan for special education. The bulk of the money our schools get currently is funded from property taxes. The state has a new plan to funnel more money into Abbott districts for special education students, and supply less money to other districts. Districts have not had an increase in special education funding since 2001. This means that to educate students in our district our property taxes have to increase. This article points out that many parents with a special needs child has moved into our state from other states for the superior services/education for their child. </p>
<p><a href=“http://www.nytimes.com/2007/12/08/nyregion/08jersey.html?_r=1&ref=education&oref=slogin[/url]”>http://www.nytimes.com/2007/12/08/nyregion/08jersey.html?_r=1&ref=education&oref=slogin</a></p>
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<p>The property tax situation always amazes me. Typically we vote on 6-7% increases and the voters reject the increases. Then there are promotional campaigns and special elections until the increases are approved.</p>
<p>It is just sickening. I can also tell you that our district has been the recipient of very generous donations from taxpayers who have the resources to donate directly to the school. Still the hits just keep on coming. I am going to qualify the donations by adding that extras that are pet projects of some teachers or the donors are where those funds are going, and not what is necessary for an education. The money is used to buy things like athletic equipment, but certainly not to pay the salary of an extra teacher.</p>
<p>Dh and I have accounting/finance backgrounds, and one of his employment perks is a good tax consultant. However, we’ve still been slammed by AMT and there’s no getting away from it for us. Between the AMT, the drop in our new house value (bought to get dh closer to work) and the 30% drop in his co.'s stock (which we could have cashed out had he taken early retirement last yr.), we’re really in the hole. The only bright side to our situation this yr. is that he has great medical ins., which is huge as our S’s bills now total about $400K and mine are higher than usual.</p>
<p>Robi, I read some of your other posts. How is your son feeling? I wish him all the best.</p>
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<p>Originaloog, Details???</p>
<p>The reason some high income people pay a lower tax is that some of their income is in capital gains which pays a lower tax. Not all high income earners are subject to AMT. Only those whose deductions and exemptions put them in a situation where they pay a lower than average tax. Two taxpayers with the exact same income will not necessarily pay the same tax. It all depends on what else they have.</p>
<p>The AMT is hard to avoid for those who have high income and high itemized deductions or income subject to AMT. You can, of course, lower it by not taking the deductions or not having that kind of income, but then again, you don’t come out ahead.</p>
<p>Northeastmom, thank you for asking. S is still in the hospital (or in again, I should say.) He required a second operation & additional blood, as well as a change in meds. We’re just testing the waters with soft food, but the results are mixed. We hope he can eat a reasonably healthy diet soon, as he’s getting very thin despite the TPN IV. </p>
<p>As for the AMT, I hope there’s some reasonable adjustment made soon. It’s out of control.</p>
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<p>Huh? By definition a “depressed area” doesnt’ have a lot of jobs available, otherwise it wouldn’t be depressed…moreover, jobs for 50-60 somethings ain’t that easy to come by, unless one is in an easily transferable profession, such as teacher or physician.</p>
<p>We only bought our home three years ago. At the peak of the market we had $100k in equity. We now have zero.</p>
<p>I am sorry to have to play the personal responsiblity card as the resident progressive, but here it goes.</p>
<p>Americans are involved in consumer spending like crack attics. I am talking about cell phones, eating out 4 times a week , and buying things on a whim because the mall was pretty today.</p>
<p>gottaloveucla: living in a high cost area does not mean having the resources for a high level of discretionary consumer spending.</p>
<p>Thank you edad.</p>