Getty Images
In Ohio, more than one in ten homeowners are quietly accumulating a future tax burden. According to the National Association of Realtors®, 12.6% of homeowners in the state have built up more home equity than the IRS allows to be excluded from capital gains taxes. Another 1.5% have exceeded the $500,000 exemption threshold for married couples.
These limits—$250,000 for single filers and $500,000 for joint filers—have remained unchanged since 1997. Over that time, U.S. home values have increased more than 260%. As appreciation accelerates, long-term homeowners are finding themselves unintentionally over the line.
Ohio treats capital gains as ordinary income, taxing them at a top rate of 4.8%. That’s lower than many states, but still a meaningful hit when combined with federal tax liability. Especially for retirees or anyone counting on home sale proceeds to fund their next chapter.
Equity that’s not fully yours anymore
Owning a home used to be a guaranteed way to build tax-free wealth. But now, for a growing number of Ohioans, those gains are starting to look taxable. This so-called home equity tax has been creeping up on homeowners who simply stayed put.
In cities like Columbus, Cincinnati, and Cleveland, values have risen steadily over the years. Longtime owners who bought early and watched prices grow may now be bumping up against federal exemption caps—and many don’t realize it until they go to sell.
That’s triggering what experts call the “stay-put penalty.” Rather than list and relocate, many owners are opting to stay in place to avoid triggering a tax bill. That behavior reduces the number of homes on the market and puts pressure on everyone else in the buying chain.
(Realtor.com)
How Ohio stacks up in the Midwest
At 12.6%, Ohio’s exposure is modest compared to high-growth states like Colorado or Florida, but it’s rising. The 1.5% of households exceeding the $500K threshold signals that even in affordable regions, equity gains are catching up.
Compared to neighbors like Indiana and Michigan, Ohio sits in the middle of the pack. But in a state where affordability has long been a selling point, any increase in capital gains liability is worth watching.
Even smaller cities are seeing the impact. Areas like Dayton and Akron have experienced significant post-pandemic growth, meaning more homeowners could soon be facing capital gains tax on real estate.
Looking to 2035 and Beyond
If trends continue, the issue will only grow. By 2035, nearly 70% of homeowners across the country are expected to exceed the $250,000 cap. In Ohio, appreciation may be slower than the coasts, but it’s steady—and that means more owners will be impacted over time.
That’s why housing advocates are pushing for the More Homes on the Market Act, a bill that would double the capital gains exemption and tie it to inflation. If passed, it could ease tax burdens for longtime owners and increase the number of homes available for sale.
Until then, Ohio homeowners should be proactive. If you’ve owned your home for 10 years or more, get a sense of how much home equity you’ve built—and what portion of that may be exposed to tax. Because in today’s market, your biggest asset could come with an unexpected price tag.
This article was produced with editorial input from Dina Sartore-Bodo, Gabriella Iannetta, and Allaire Conte.