Shared thousands of times on Facebook with less than a month until the Nov. 3 general election, posts on Facebook claim that Democratic presidential nominee Joe Biden’s “Capital Gains Tax means that when you sell your home you’ll owe taxes of 40% of your profit.” This claim is partly false: Biden plans to raise the capital gains tax only for those earning more than $1 million a year.
Michael Gwin, a spokesman for the Biden campaign, confirmed with Reuters via email that Biden’s plan to tax capital gains in the same as ordinary income applies only to those earning over $1 million annually. As stated joebiden.com/two-tax-policies/ on the former vice president’s campaign website, Biden’s tax plan includes “asking those making more than $1 million to pay the same rate on investment income that they do on their wages.”
As explained here by The Balance, a personal finance website, the capital gains tax is a fee the government imposes on a profit made from selling assets like real estate or stock investments. A capital gain is when an asset’s total sale price is greater than the asset’s original cost (a capital loss, on the other hand, is when the total sale price is less than the original cost).
The capital gains tax is due when you sell your investment. For example, if your home appreciates in value, you will not owe a capital gains tax during the years that you own it. But once you sell the house, you must report the profit on your tax return and pay a tax at your income bracket’s capital gains rate ( here , here ).
(Further reading on types of capital gains here .)
Currently, an individual earning between $0 and $40,000 pays a 0% long-term capital gains tax. An individual earning between $40,000 and $441,450 pays a 15% long-term capital gains tax. An individual earning more than $441,450 pays a 20% long-term capital gains tax (here). The respective rates for married couples filing jointly, heads of households, and married couples filing separately are provided www.irs.gov/taxtopics/tc409 by the IRS.
According to an analysis ( here ) by the Committee for a Responsible Federal Budget (CRFB), an independent and nonpartisan public policy organization based in Washington, D.C., the capital gains tax rate for those making more than $1 million would increase from 20% (plus a 3.8% surtax) to 37% (plus a 3.8% payroll tax) under Biden . This change is likely where the posts’ claim, which lacks key context, originates.
According to the CRFB, Biden’s plan “would eliminate the preferential treatment of capital gains and dividends for higher earners.”
Eric Toder, co-director of the Tax Policy Center, another independent public policy think tank in Washington, D.C. ( here ), told Reuters via email that under Biden’s plan, “there is no increase in the capital gains rate for taxpayers with income below $1 million.” The Tax Policy Center’s full analysis of the Democratic presidential nominee’s tax plan is available here .
Rich Prisinzano, director of policy analysis for the Penn Wharton Budget Model at the University of Pennsylvania ( here ), also confirmed to Reuters via email that Biden’s plan to get rid of the lower preferential rate on long-term capital gains and dividends is “only for those with more than $1 million in annual taxable income.”
“Anyone making less than that amount (or who has owned the house for less than a year before the sale) would not see any difference in their tax liability from selling a house,” Prisinzano clarified further.
He said that under both current law ( www.irs.gov/taxtopics/tc701 ) and the Biden tax plan, a taxpayer selling their primary residence can generally exclude $250,000 (or $500,000 for a married couple) of that sale from their income when filing taxes.
“Very few home sales end up generating any income tax liability under current law, and I don’t see a reason that that would change under Biden’s proposals,” Prisinzano said.
The Penn Wharton Budget Model’s analysis of Biden’s tax plan is available here .
Partly false. While Biden has proposed taxing capital gains as ordinary income, this would only apply to those making above $1 million a year, an income bracket that would pay at a rate of 37% (plus a 3.8% payroll tax).
This article was produced by the Reuters Fact Check team. Read more about our fact-checking work here .
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