Millions of homeowners may face tax ramifications in 2011

“The estate tax is clearly an issue for family-owned businesses. Unless Congress acts quickly to permanently repeal this onerous tax, it could also ensnare millions of homeowners starting in 2011,” said NAHB President David Pressly, in a news release.

The “Economic Growth and Tax Relief Reconciliation Act of 2001” signed into law by President Bush five years ago will gradually phase out the estate tax until it is fully repealed in 2010. However, without permanent repeal or some type of reform, the tax will return in 2011 to its pre-2001 level – a 55 percent tax rate on amounts exceeding a $1 million exemption.

Employing a conservative forecast of housing prices, the NAHB report, “The Estate Tax and Housing,” shows that nearly 3.5 million homes will exceed $1 million in market value in 2011, guaranteeing that those who inherit them will be liable for estate taxes.

Using mortality rate projections from the Centers for Disease Control, NAHB estimates that more than 50,000 of these households would be subject to the estate tax in 2011, a substantial increase from current figures.

While the Joint Committee on Taxation estimates that there will be approximately 110,000 estate taxpayers in 2011, the NAHB report finds that 46 percent of these estate taxpayers will be paying this tax solely because the net worth of their house tops the $1 million threshold.

The analysis does not consider other household wealth in determining the number of affected estates.

Taking into account wealth from sources such as business assets, financial holdings and other asset categories increases the estimates substantially.

Millions of additional families who today own homes valued between $450,000 and $550,000 will exceed $1 million in total assets in 2011, making them eligible for estate tax liability as well.

“Unless something is done, millions of additional families will one day face this burdensome tax, forcing them to engage in costly estate planning so that they can protect their homes for their heirs,” Pressly said.