Megalocerus t1_j6gu8q8 wrote on January 30, 2023 at 5:33 AM

Reply to comment by Jenna_Rein in ELI5: Why does the IRS want your illegal income declared on tax returns? by xCreamPye69

No, your house or stock can increase in value, changing your net worth, but it is not taxable until you sell it.

Randomstringofnum t1_j6gwjzd wrote on January 30, 2023 at 5:58 AM

Wrong, when a home increases in value, so does it’s assessed price, assessments determine the value of the home, and property taxes are based on this value, a higher assessment means a higher tax bill.

markroth69 t1_j6h8ecp wrote on January 30, 2023 at 8:26 AM

But that's local property taxes. Not federal income taxes. The U.S (federal) (Income) tax code does not progressively tax wealth. It progressively taxes income.

Jenna_Rein t1_j6ifsdo wrote on January 30, 2023 at 3:49 PM

Literally, what I said…you are taxed on the increase in your wealth, at some point.

However, specifically the increase in home values has an exempted amount - 250,000/500,000 based on filing status and ownership tests, is excluded before capital gains hit.

Megalocerus t1_j6lhskh wrote on January 31, 2023 at 4:06 AM

No, it's not true at all. You are taxed on income, not the increase in wealth. I can have my wealth plummet due to a stock market drop, but owe taxes on my interest income even as my wealth drops. I can go into debt on my $100K income so my wealth is negative, but I still owe taxes on the $100K. Wealth has nothing to do with it except maybe if I die with more than 11 million, and then it is the change of ownership that is taxed--a kind of transaction.