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Hello everyone! With you, Graham. And it's just incredible. It appears that secret behind-the-scenes discussions are underway that could soon allow homeowners to avoid paying capital gains tax on the first million dollars of profit on the sale of any property. And if you don't believe me, listen to what was just said on the Dave Ramsey show. They are actually discussing the possibility of issuing an executive order within the next few weeks regarding the capital gains tax issue, which failed last time. So, this is done by including it in the You are not making permanent changes to tax laws. They are talking about increasing this amount to a million. So now you're thinking: I have a rental property, I have a summer house, I live in a big house that I don't
need, so. so what? Not just the main residence, but everything in a row. They plan to do this in the next I just got a call today about this Listen, all of this means that if such a decision is made, even in a mitigated form, it will have a monumental impact on the entire housing market across all price segments for both buyers and sellers. So we need to discuss what exactly this will entail, what consequences we will see almost immediately, and what the chances are that it will actually be adopted once you hit the like button and subscribe if you haven't already. Because if you don't, Nancy Pelosi will come to your house late at night and make you buy Lululemon stock. So thank you very much, and also a big thank you to Surfshark for sponsoring
this video, but more on that later. So, in terms of the housing market and where it all starts, we need to talk about the current capital gains exemption. The fact is that now, when you sell your primary residence, you can exclude the first $250,000 of the gain, provided you have lived in that property for two of the last five years. Sounds good, right? Well, that's the problem. These figures were set by the Taxpayer Relief Act of 1997 and have never been adjusted for inflation. Literally not once in about 30 years, even though housing prices have almost quadrupled since then. Think back to 1997, when this was adopted: a house priced over $500,000 was a pretty rare occurrence. And now that's not even the price of the simplest starter home.
In fact, if you simply index that $500,000 for inflation since 1997, guess what? Today, this amount would be equal to just over a million dollars. Without paying taxes. No kidding. To show how important this is, imagine a couple buying a house for $400,000 in 2005 and selling it today for $1.4 million. That's a profit of $1 million, but they could exclude $500,000 from that amount and pay tax on the rest, which is $119,000 that would go to the federal budget. But under this new concept of the plan, the tax would be zero. However, this is just the beginning, because if this man is right, homeowners are just the tip of the iceberg, as this will also affect rental properties. And first of all, it's worth clarifying: at this time, this is just a discussion
of a concept, a proposal voiced by one person in a podcast, which may be preparing for implementation. But if it did happen, this is where we would see the biggest impact. Nationwide, there are currently 49 million rental properties in the US, and half of them have mortgages at less than 4% with an average equity of $300,000. This means that millions of people are renting out their properties and refusing to sell because they don't want to lose the low interest rate. Also, if they sold, they would have to pay capital gains tax. So what do they do? That's right, they just don't sell. The tenant covers the costs, and they keep the asset, which hopefully
increases in value over time. Although it would radically change the situation. Again, currently rental properties do not qualify for the capital gains tax exclusion unless the homeowner has lived there for two of the last 5 years. But if this condition is lifted and suddenly the first million dollars of profit becomes tax-free, I guarantee that there will be a wave of sales, as fast as possible, because everyone will want to take advantage of it while the offer lasts. After all, imagine you bought a house for $400,000, it's now worth $800,000, and you're making $2,000 in profit per month. Well, if you sold it, you would pay $80,000 in income taxes, which effectively eliminates the rental income from the last 40 months. But if we now abolish
capital gains taxes, then a person actually receives an additional amount equivalent to 40 months of rent, not including the tax on the return of depreciation, and as a result, many more people will start selling their homes, the market will be flooded with offers, and theoretically prices should fall. Oh, and by the way, this isn't just Trump's idea. Similar concepts have been discussed before, including the No Home Sales Tax Act, which would eliminate the primary residence limits entirely, or the bipartisan Housing Market Expansion Act, which would double the limits to $1 million and link all gains to inflation going forward. Although both bills are still stalling in Congress. That's why we really need to discuss how something like this could
become law. The likelihood of such a decision being made, even in a softened version, and its impact on everyone watching now. Because it almost instantly changes the calculations around buying, selling, and owning property in ways that most people can't even imagine. Although before we get to that, regarding money-we spend a lot of time discussing how to earn more of it, where to invest it, and how to get the highest return. But above all, it's just as important to know how to access your funds safely. For example, most people don't even think twice when checking their bank account, logging into a broker's office, or making purchases over Wi-Fi at a hotel, coffee shop, or airport. But the reality is that public Wi-Fi isn't always secure, and
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money-back guarantee, so you can try it out and see if it's right for you. As a reminder, the link is below along with Graham's code. Thank you very much, and now let's get back to the video. So, regarding whether there is a chance of capital gains tax being passed and how it will affect the market, we should discuss housing prices. First of all, it is important to note that according to the National Association of Realtors, 34% of homeowners have incomes over $250,000, and only 10% have incomes over $500,000, which mostly applies to coastal states. We are talking about California, Washington, Massachusetts, Hawaii and the
District of Columbia. This means that in the short term, most of the housing that becomes available will be more expensive in coastal cities, as most homes fit within the current benefit limits. As for rental housing, this is where the situation gets really interesting. Today, there are over 49 million rental properties in the US, and if even 3% of them are put up for sale through this offer. This would mean about one and a half million housing units on the market, increasing supply by 25-35%, especially in cities such as Las Vegas, Phoenix, Tampa, Atlanta, and Dallas, where investor activity is much higher. As a result, when the number
of offers begins to exceed the number of buyers, housing prices should decrease, which is already happening in some cities. Therefore, in the short term, we may see more offers, higher competition among sellers, and lower prices for buyers, as sellers will be willing to lower the price, saving on taxes. However, regarding the long-term consequences, it all depends on whether this will be a temporary or permanent measure. If this is temporary, then in the first year we will again see a wave of sales and a significant decrease in prices. In the second year, housing prices begin to bottom out and stabilize. And then, as this starts to wind down, we'll see all the owners who were thinking about selling finally put their properties up for sale
at the same time, flooding the market with supply, and we should see a decline in home prices across the country. And this is not a coincidence at all. As evidence of this, home sales fell by about 27% in July 2010, 3 months after the first- home buyer tax credit expired. So, this is not higher mathematics at all. So, who wins here? Well, it's actually owners with a lot of capital who are planning to sell, as well as buyers who want more choice and maybe slightly lower prices. As for who loses, it's the current owners without much profit who are forced to sell in a market with excess supply, which puts pressure on prices. So, imagine: you have a house, you have little income, and now you have to compete with everyone else who is
simply saving on taxes. And, oddly enough, it may become more difficult for renters, because not only will competition for rentals increase as people sell their homes and choose to rent, but also if the owners who rented out the property decide to get out of the game, there will be fewer rental properties on the market. So rental prices Of course, this all depends on a million different factors and details that we simply don't know. But as for whether it's likely to be passed at all in the future, we need to talk about the midterm elections. Theoretically, yes, it could pass without needing 60 votes in the Senate. All thanks to something called budget reconciliation. Essentially, it is a special process that Congress can use for legislation
related to taxes, spending, and the federal budget. This allows decisions to be made by a simple majority vote, as long as they do not increase the national deficit beyond a certain amount. In fact, that's how a big and wonderful bill passed last year without a single Democratic vote. But the caveat, of course, is that anything that increases the national deficit over 10 years is canceled. And that's why previous benefits for tips and overtime pay expire after 2028. So even if it were passed, it would probably all be temporary, like the rest. However, there is a small problem here. Republicans are currently working on a third reconciliation bill, and it doesn't mention taxes at all. In addition, the Senate leadership
has openly stated that it does not want to touch the tax code, because in that case, Democrats will demand a vote on Medicaid and Obamacare subsidies right before the election. In addition, the midterm elections are just over a month away. Most members of Congress will be absent in October, and consideration of a major, important bill has taken five months. So if I had to estimate the odds of this, I would give low single digits, and that's me being very generous. That's why it's realistic that repealing the home sales tax could just be a campaign promise for the future, or the bipartisan " Houses on the Market Act," which already has 170 co-sponsors, will somehow be added to it and passed, but I don't see that happening. But if it did happen,
this law would make it permanent. Oh, and as for applying this to investment properties, there is currently no talk at all in Congress about making this a reality. There aren't even any discussions, nothing. This part- just one guy on the podcast saying who knows what. Furthermore, even if the odds are extremely low, by the time something like this can be enacted, if it happens at all, planning ahead will likely also be too late. So, in my opinion, this is what you came for. Overall, this is not a surprise. I actually like the idea of expanding the capital gains exclusion to a million dollars. To me, this is simply indexing profits to inflation, as it should have been since 1997, and it would encourage a lot more people to sell. And
of course, one could argue that homeowners will have more money left over after the sale to then roll it over to the next purchase, seemingly negating the benefit. But I would say that a lot of people who are selling their homes are probably people whose children are grown and they will sell, move into a smaller home, and fund their retirement instead. They will not simply replace the housing with one of equal value or improve it. I think many of them will move to smaller apartments. And so, I think, it will free up a lot of housing, which would be great for first-time homebuyers or young families. Apart from that, if this is passed, we need to be realistic about who it will
help. According to Yale University, only 10% of homeowners have incomes above the current limit, and the average net worth of these owners is approximately $5.7 million. So, this can hardly be called a tax break for the middle class. This will really benefit wealthy people in coastal cities, where real estate is usually quite expensive. That's why, yes, it would help increase supply in the market, but I don't see it as a long-term solution. Not to mention that house prices could fall due to an increase in supply by more than anyone would pay in taxes. Just do the math yourself. If a married couple has an income of $700,000, which is $200,000 over the limit, the worst- case tax would be about $47,000. But if home prices fall 5% while they wait for a $
1.2 million house, that would mean a loss of $60,000. So, you will lose more after the additional supply hits the market than if you just sold now. In my opinion, the only solution here is to stimulate construction. Perhaps one day we will get AI robots that will do this for a small price, reducing costs, but until then we will probably see the same thing, and most likely it will remain a promise for the future, the chances of which are very small. Unless you click the " like" button and subscribe if you haven't already So, thank you very much, and I also want to mention for anyone interested: a little over a year ago, I started a networking group for entrepreneurs, business owners, and investors so they could meet and, so to speak,
talk business. We received thousands of applications, and the initial group consisted of only a few dozen people. So everyone else was left out, but now we're expanding and accepting a few additional applications. If this sounds interesting to you, the link to apply is below in the description. Again, this is really for entrepreneurs, business owners, and investors. So, the application link is below, and we will do our best to consider as many people as possible, as we have a few vacancies. Thank you very much and see you next time
