Millions of Pricey Homes Could Trigger Estate Taxes in 2011
Millions of home owners could face the prospect of higher taxes in 2011, unless Congress acts to repeal or reform the estate tax, according to a new NAHB study.
“Today, the estate tax is clearly an issue for family-owned businesses,” said NAHB President David Pressly. “Unless Congress acts quickly to permanently repeal this onerous tax, it could also ensnare millions of home owners starting in 2011.”
Signed into law five years ago by President Bush, the “Economic Growth and Tax Relief Reconciliation Act of 2001” is gradually phasing out the estate tax, until it is fully repealed in 2010. However, without a permanent repeal or some type of reform, the tax comes roaring back in 2011 to its pre-2001 level — a 55% tax rate on amounts exceeding a $1 million exemption.
Under current law, this year there is a tax rate of 46% on the amount that exceeds a $2 million exemption.
Employing a conservative forecast of housing prices, the NAHB report, entitled “The Estate Tax and Housing,” shows that nearly 3.5 million homes will exceed $1 million in market value in 2011, guaranteeing that those who inherit them will be liable for estate taxes.
Using mortality rate projections from the Centers for Disease Control, NAHB estimates that more than 50,000 of these households would be subject to the estate tax in 2011, a substantial increase from current figures.
While the Joint Committee on Taxation estimates that there will be approximately 110,000 estate taxpayers in 2011, the NAHB report finds that 46% of them will be paying the tax solely because the net worth of their house tops the $1 million threshold.
The analysis does not consider other household wealth in determining the number of affected estates. Taking into account wealth from sources such as business assets, financial holdings and other asset categories increases the estimates substantially. Millions of additional families who today own homes valued between $450,000 and $550,000 will exceed $1 million in total assets in 2011, making them eligible for estate tax liability as well.
“The NAHB report shows that unless something is done, millions of additional families will one day face this burdensome tax, forcing them to engage in costly estate planning so that they can protect their homes for their heirs,” said Pressly. “This tax is a ticking time bomb and Congress must act now to defuse it.”
More information on this report as well as more in-depth analysis, key data and housing forecasts is available by subscribing to HousingEconomics.com, NAHB’s economics publication for America’s housing industry. Annual subscription prices for NAHB members start at $195. For subscription questions, NAHB members can e-mail Karel Leon, or call him at 800-368-5242 x8476. Non-members should click here to subscribe.