Growing Your Wealth by Being a Tax-Savvy Homeowner in Bend, Oregon
According to Tiffany Clark, realtor with Bend Premier Real Estate, Central Oregon’s real estate market has boomed and backed up slightly, with home values in places like Bend and Redmond off their all-time highs by about 5%. But, Tiffany adds, “We expect gains in Central Oregon home values of 3 to 5% over the next 12 months.”
If your home’s appreciation has reached $500,000 or more, selling now could be a smart move to lock in tax-free gains before home prices take off again. Thanks to the federal capital gains tax exclusion, individuals can exclude up to $250,000—and married couples up to $500,000—from their realized long-term gains on the sale of a primary residence. Selling before surpassing this threshold lets you maximize your profits without additional federal tax liability.
Some quick math: If you are married and have a realized capital gain on the sale of your primary residence of $700,000 and are subject to a 20% long-term capital gains tax, the federal tax due will be $40,000. In addition, the 3.8% Net Investment Income Tax (NIIT) may apply to part or all of the gain, as would Oregon income tax. Had the sale been done with a $500,000 gain, there would be zero federal tax due, as well as lower potential NIIT and Oregon tax.
However, selling and buying in today’s market comes with challenges, particularly higher mortgage rates. While selling allows you to cash in on appreciation, purchasing another home could mean securing a new loan at rates much higher than those seen in the past decade. This could increase monthly payments, even if your next property is less expensive. For many, this added cost diminishes the appeal of moving, especially if their current mortgage rate is locked in at historic lows.
That said, selling with substantial equity provides unique opportunities. Many Central Oregon homeowners use the proceeds to downsize, purchase homes outright in more affordable communities, or reinvest in other ventures. For example, moving to nearby Prineville or La Pine may allow you to avoid higher mortgage rates altogether by buying with cash. Alternatively, renting for a while could buy time to evaluate long-term financial goals while still capitalizing on your home’s appreciation. Finally, if you do continue to have a mortgage, today’s higher rates may become excellent refinancing candidates in the years ahead should mortgage rates decline.
Ultimately, the decision to sell hinges on balancing the tax advantages of the capital gains exclusion with the reality of higher borrowing costs. If your current home no longer fits your needs, or you’re ready to diversify your wealth, now may still be the right time to make a move. Working with a local real estate agent and financial advisor can help you weigh these factors and decide what’s best for your situation.
Stu Malakoff, CFP®, CDFA®, CPFA, CRPC® I President, Bend Wealth Advisors
CERTIFIED FINANCIAL PLANNER™
523 NW Colorado Ave. Ste. 100
Bend, OR 97703
bendwealth.com
Direct 541.306.4325 I Office 541.306.4324 I stu@bendwealth.com
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Bend Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services.
The information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Bend Wealth Advisors and not necessarily those of Raymond James
Raymond James is not affiliated with Tiffany Clark or Bend Premier Real Estate. Raymond James Financial Services, Inc. does not provide advice on taxes or mortgages.
