Interactive Map: Most Home Sales Will Not Likely Lead to Fair Share Tax Payments

Key Takeaways

  • In a home sale, only the capital gain (the difference between the sale price and previous purchase price), not the sale price, is considered taxable income and potentially subject to the proposed Fair Share tax.
  • In 2021, 2% of homes sold for a gain of more than $1 million, and less than 1% of homes sold for a gain of $1.5 million or more.

Even in Massachusetts’ hot housing market with many homes selling for over $1 million, the vast majority of all home sales will not subject the home sellers to a proposed “millionaire’s tax.” On November 8, 2022, voters will decide on the Fair Share tax which if passed, would create an additional 4 percent tax on taxable income over $1 million to support education and transportation. However, because home sellers are not taxed on the sale price of a home but rather on the capital gain from the sale of a home, most sales will not push them over the $1 million threshold.

Housing Sales and Capital Gains

When a seller sells a home for more than the purchase price, this difference is known as a capital gain (the difference between the sale price and previous purchase price). For example, if a home were initially purchased at $450,000 and eventually sold at $1,000,000, the capital gain would be $550,000. If the same home sold for $1,450,001, the capital gain would be $1,000,001 but the taxable amount of a capital gain from a home sale is almost always reduced by significant deductions (see below).

Would Most Home Sellers Likely Be Subject to the Fair Share Tax?

Only a very small portion of households in Massachusetts actually sell a home each year, and most of those sales produce a capital gain of less than $1 million. Even in the current housing market, an analysis of 2021 housing data1 shows that only 2% of all home sellers sold their homes for a gain of more than $1 million.

On top of that, there are several types of deductions home sellers can use to further reduce their taxable capital gain from selling a home. Most home sellers would be eligible for a tax exemption that allows taxpayers to exclude up to $250,000 (or $500,000 if married filing jointly) of capital gains when selling a primary residence.2 With these deductions, most home sellers would need to sell a home for significantly more than $1 million over their previous purchase price before their taxable income reached the Fair Share threshold.3 Even in 2021, a year with rapidly rising home costs and high inflation, less than 1% of all home sales netted the seller a capital gain of more than $1.5 million.4

2021 Residential Home Sales in Massachusetts
Capital GainsNumber of Homes SoldShare of Residential Sales
Under $1M5100,44898.0%
Above $1M2,0992.0%
Above $1.5M8950.9%
Total 2021 Home Sales6102,547100.0%
Source: The Warren Group; A Massachusetts-based national real estate and mortgage data provider. Data provided for homes sold throughout Calendar Year 2021.

Footnotes
1The Warren Group; A Massachusetts-based national real estate and mortgage data provider. Data provided for homes sold throughout Calendar Year 2021.

2Commonwealth of Massachusetts. Governor’s Budget Fiscal Year 2023 Recommendations. Personal Income Tax Exclusions from Gross Income. Tax Item 1.021 Exemption of Capital Gains on Home Sales.

3Home sellers realizing gains of $1.5 million (if married) could potentially use the $500,000 capital gains exemption to bring the gain down to $1 million, which is below the Fair Share taxable income threshold

4The Warren Group; A Massachusetts-based national real estate and mortgage data provider. Data provided for homes sold throughout Calendar Year 2021.

5Includes new-built homes and homes sold at no gain or at a loss.

6Includes all homes sold.

Latest

New Census Data Highlights Need for Family Tax Credits Waiting in State House

While the Massachusetts Legislature debates two versions of expanded tax credits to improve affordability for families, new census data dramatically show what a difference these credits make to reduce poverty, especially for children.

Read More →

Higher Education Investments: Supporting Our Economy and Future Generations

Public higher education is critically important to the success of Massachusetts’ economy, but state support has lagged in recent decades. This report evaluates current proposals to better support campuses and make higher education more affordable, particularly the CHERISH Act and the Debt-Free Public Higher Education Act.

Read More →

MassBudget testifies to end tax subsidy for private jets

MassBudget testified in support of House bill 2826 and Senate bill 1758, which would end the sales tax exemption for personal aircraft. The exemption disproportionately benefits very wealthy individuals and worsens climate change by encouraging the most fuel-intensive form of travel.

Read More →
Scroll to Top

Get news from Massachusetts Budget and Policy Center in your inbox.