Getty Images
In New Hampshire, the American dream of homeownership is quietly becoming a tax dilemma.
A new analysis from the National Association of Realtors® finds that 50% of homeowners in the state have more home equity than the IRS currently allows to be excluded from capital gains tax. And 9.3% of married couples filing jointly owners exceed even the $500,000 threshold.
That’s because the federal capital gains exclusion—$250,000 for individuals, $500,000 for joint filers—hasn’t changed since 1997. But in the decades since, home values have skyrocketed, growing more than 260% nationwide. Now, middle-class homeowners in states like New Hampshire are hitting limits originally designed for luxury markets.
New Hampshire doesn’t tax capital gains at the state level, which eases some of the burden. But with so many owners over the federal cap, five- and six-figure tax bills are becoming increasingly common—and most don’t know they’re at risk until they get ready to sell.
Long-term owners are most at risk
The so-called home equity tax hits hardest for those who bought years ago and stayed put. In many cases, they’ve paid off their mortgages, made home improvements, and watched values rise. But that appreciation, if it exceeds the exclusion cap, becomes taxable the moment they sell.
That’s leading to what economists call the “stay-put penalty.” Sellers delay listing their homes—not because they want to stay, but because they don’t want to trigger a big tax bill. And that keeps inventory off the market.
In New Hampshire’s hot spots—like the Seacoast, Concord, and the Lakes Region—price growth has been strong. Even modest homes that were once well below the threshold are now triggering federal tax exposure. And capital gains tax on real estate isn’t a one-time surprise—it can seriously disrupt long-term planning.
(Realtor.com)
How New Hampshire Stands Out
New Hampshire’s 50% exposure places it among the top states in the nation. The 9.3% of owners exceeding the joint-filer cap is especially striking. That means nearly one in three homeowners may owe tax even if they sell a fairly typical home. The rate is the highest amongst all of the New England states, apart from Massachusetts, which sets the record with 62.3% for single filers. Most of the states at the same rate as New Hampshire are out West, like Colorado and Oregon.
Clearly, this is no longer just a coastal metro problem. Appreciation over time, combined with static tax policy, is reshaping the selling equation. And sellers who aren’t prepared may end up handing a significant portion of their profit to the IRS.
This trend is contributing to tight housing supply. Homes that would normally turn over every 7 to 10 years are now staying off the market. And that’s driving up prices and competition across the state.
What to Expect by 2035
The pressure isn’t going away. By 2035, nearly 70% of homeowners nationally could exceed the $250K exemption, and over 38% could surpass the $500K threshold. For New Hampshire, where equity levels are already high, tax exposure is set to increase sharply.
The NAR actually predicts that 90.6% of homes will be at risk by 2035, appreciating over $250,000, while a staggering 60.8% will go over the $500,000 threshold.
That’s why many in the real estate industry are pushing for the More Homes on the Market Act. The proposed law would double the capital gains exclusion and index it to inflation—something experts say should have happened decades ago.
Until that passes, homeowners must plan carefully. Review your home equity position, talk to a tax advisor, and prepare for the possibility of a capital gains hit. Because in New Hampshire, the price of appreciation may be higher than you think.
This article was produced with editorial input from Dina Sartore-Bodo, Gabriella Iannetta, and Allaire Conte.