The Daily Money: How inflation can hurt homeowners with taxes, insurance
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Happy Monday, Daily Money readers. Jayme Deerwester back with you after the holiday weekend. I got out on the water every day; I hope you were able to spend it how you wanted. And if you worked this weekend, thank you. I've been there and it's not much fun. But it is appreciated.
How inflation can hurt homeowners with taxes, insurance
Home prices historically tend to increase when the Consumer Price Index is pushing higher, as is the case now. Over roughly the past year, for example, U.S. inflation has increased 8.3% and housing prices have shot up 20% or more in many markets. In fact, housing costs are a key component that affects the rate of inflation.
However, rising prices and inflation don't benefit homeowners in all respects. Below are some caveats homeowners should keep in mind involving taxes and insurance:
Inflation can make home gains taxable. Homeowners who sell a primary residence can exclude up to $250,000 in gains from taxation if single and $500,000 if married and filing jointly – numbers that have been in place since the Taxpayer Relief Act of 1997. If you can exclude the entire gain, you don’t need to report the transaction on your tax return unless you received a Form 1099-S, according to the Internal Revenue Service. If you can’t exclude the entire gain, you must report the transaction.
is your home worth more now? You may not be carrying enough homeowner's insurance. “It is critical that homeowners make sure they have the right amount and right types of coverage during this period of significant inflation,” said Karen Collins, assistant vice president of personal lines at the American Property Casualty Insurance Association, in a statement. This especially pertains to people who have completed home renovations. “But unfortunately, our survey shows that many individuals may not be properly prepared.”
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🎧 Mood music 🎧
Reading about how inflation can affect your home's value has got me humming a certain '80s tune by Madness.
"Our house, was our castle and our keep. Our house, in the middle of our street. Our house, that was where we used to sleep. Our house, in the middle of our street."
LISTEN WHILE YOU WORK: You can hear just about every song quoted in the newsletter on the Daily Money Mood Music playlist on Spotify.
This article originally appeared on USA TODAY: The Daily Money: What homeowners need to understand about inflation