The impact of capital gains tax exemption on housing sales

Abstract

The Taxpayer Relief Act (TRA), enacted in 1997, allows tax exemption of capital gains up to $500 000 for married couples filing jointly and $250 000 for singles, on the sale of primary residence. By making it easier to sell a house that has appreciated in price, this tax exemption provides an additional incentive for purchasing a house. The study utilizes a simple regression model to demonstrate that TRA has had a statistically significant positive impact on housing sales.