Jenna_Rein t1_j6ifsdo wrote on January 30, 2023 at 3:49 PM

Reply to comment by Megalocerus in ELI5: Why does the IRS want your illegal income declared on tax returns? by xCreamPye69

Literally, what I said…you are taxed on the increase in your wealth, at some point.

However, specifically the increase in home values has an exempted amount - 250,000/500,000 based on filing status and ownership tests, is excluded before capital gains hit.

Megalocerus t1_j6lhskh wrote on January 31, 2023 at 4:06 AM

No, it's not true at all. You are taxed on income, not the increase in wealth. I can have my wealth plummet due to a stock market drop, but owe taxes on my interest income even as my wealth drops. I can go into debt on my $100K income so my wealth is negative, but I still owe taxes on the $100K. Wealth has nothing to do with it except maybe if I die with more than 11 million, and then it is the change of ownership that is taxed--a kind of transaction.