Joel and Kathryn Friedman, both 71, are counting the days until they can sell their home and move into a 55-plus community.
The retired empty-nesters have been ready to downsize for years, but are reluctant to sell their five-bedroom, 5,000-square-foot Southern California house [mansion] in large part because of at least $700,000 in capital gains taxes they estimate they’d have to pay.
Since 1997, home sale profits over $500,000 (for married couples) and $250,000 (for single filers) have been subject to a capital gains tax of up to 20%. That threshold hasn’t changed since 1997, meaning that — between inflation and soaring home prices pushing an ever higher number of houses above that limit — many more home sellers have to pay the tax now than when it was first implemented.
The Friedmans are among a growing number of older homeowners discouraged by the tax from selling their valuable properties. Housing economists say that dynamic has exacerbated a shortage of family-sized homes on the market, especially in expensive places like California.
The Friedmans’ house is too big for them, and maintenance costs are only rising, Joel said. “There are a million reasons why we’d like to move, but we’re not because the tax is just burdensome,” he said.
But that could change — there’s bipartisan support in Congress for raising the federal tax threshold to boost home sales in a stagnant market.
700k is 20% of 3.5 million
That leaves 2.8 million
If put into savings with a 4% annual interest rate, that is 112k per year
And they are complaining?
You fucking kidding me?
2.8 million dollars is more than most people have the ability to save for retirement in the first place.
They want us to cry for them because their payout from a single asset after tax is more than the average middle class retirement account?
Get fucking real, if anything this makes me think the capital gains tax is too low for their bracket.Agreed… this couple isn’t hurting either way.
However as they said the limit hasn’t changed in almost 20 years. For most older people in America their home is the single most valuable possession and what many have to sell when they are unable to care for themselves and have to go into some kind of care facility. For people living in a HCOL area, their home can easily be many times more valuable than their savings and their primary or only asset of significant value, and a $1M house is a starter home.
It makes sense for the limits to be increased, but the couple that’s the subject of this article doesn’t deserve anyone getting teary-eyed.
Yeah that exemption always seemed pretty high, but as a newly single person (where the exemption is cut in half) in a high cost of living state where home prices have been rising excessively, and I’ve owned my home long enough to raise kids (and increase value a lot) …… yeah it’s easier to see the other side. I’m ok but far from wealthy, and need to downsize in order to afford retiring, but would also be hit by capital gains.
Given what home prices have been doing and this exemption never changing, it’s no longer realistic. Now it’s not just the wealthy
I’m all for increasing the limit and also increasing the tax rate. Costs have gone up, period, but that doesn’t mean rich schmucks shouldn’t still be paying more
The first $500k is taxed at a lower rate, so they’re actually making more than that on the sale.
Also at their age they could live on that money until they die. I hope an earthquake takes out the home making it worthless. Fucking greedy bastards. They are Fucking 71.
at my age i can live on that money until i die and i’m much younger.
They are soooooo poor 😭 😭 😭 i can’t contain my sadness over this unjust tax 😭 😭 😭 Their house is worth 🤑4,5 million dollars🤑, and they don’t want to 😡subsidize the state😡, that would be 👿evil socialism👿 ‼️ ‼️ ‼️
damn, i wish i had that problem.
This is the dumbest fucking article, holy shit. Fucking boomers. Cry more about paying the already generously low LT cap gains tax. Jesus fucking christ.
The one thing that would turn my exhausted ire into joyful schadenfreude is if they equity-leveraged the shit out of it, and didn’t understand that this would hit them in the balls when they eventually sold.
I wish the boomers would just die already. At this rate I’m going to live my whole life under their greedy little thumbs
Yeah. My wife and I paid roughly 38% on the 120k we made last year through grueling hours and hard work.
These old fuckers should pay at least that much in taxes on the house they made millions on just by living in it.
Capital gains tax of up to 20%.
What’s 5x 700,000 ?
“The Friedmans finally put their house on the market in May for nearly $4.5 million”
Cry me a fucking river, boomers.
Enough that they shouldn’t fucking care.
Yeah, and the tax is only on the profit they make, not the entire selling price.
And any capital improvements will lower that ‘profit’ too. So anything from a new water heater to a new roof can be used to raise the cost basis of the home lowering the tax paid.
Both of those examples are “regular maintenance” that aren’t legally capital improvements
At least as importantly , who tracks this stuff for the decades you might live in a house. I always thought this exemption was good in fairness alone: as someone just trying to live, I’m unlikely to keep the decades of paperwork needed for this, whereas a wealthy person with an accountant or business manager would
Yeah but profit is just how long you’ve lived there
Where exactly is this a dystopia? The part where rich people too have to pay taxes?
I guess you’re mistaken, /r/aceoandultrawealthydystopia is a different sub.
The fact that the house is woth that much in the first place. Thing is owning a single home doesn’t make you rich, since you need a home to life, you can’t get that money unless you’re willing to downgrade. Now these people are, but the tax is limiting their options. Real estate should be taxed while you have it, not when you sell.
Sounds like they can afford it if they’re rich enough to own that house.
Oh no. They only get to keep 2.8 million? Whatever will they do?
The tax is only 20%, like you get to keep the other 80%. That sounds pretty good to me.
Everyone in here is ripping these people and ignoring their actual situation and the problem it creates for all of us.
If their profit is that high, they bought decades ago, when the price of a home like this was in the reach of a normal high paid professional. Decades later after raising kids, paying for college, and saving normally, they might not be wealthy, or even rich in cash and investments. This house might be a large majority of their net worth. And guess what? Anywhere they want to move is going to have had the same crazy inflation as their current home. Why would they sell when, after taxes, any place they buy with what’s left will be a major step down.
And for their specific example, 55-plus communities usually sell for much less per sqft because they come with huge HOA fees to fund all their amenities. Generally people expect to pay these fees with the difference between the sale of their old home and the new one. They might not be able to afford the HOA fees after taxes.
They’ve got two choices: They can sell and either make up the taxes with their savings, drastically reducing their standard of living (if they’re even able to do that, don’t forget if they take 700k out of a 401k all at once they’ll get wrecked in taxes that year) or move somewhere shittier with the after tax proceeds. Or stay in their too large home, keeping it off the market. Edit: I forgot a commonly used option; keep the old place, rent it out and charge enough to pay the mortgage on the new place and property tax, HOAs, and maintenance on both (and why not a little profit too?), further fucking the market.
Empty nesters staying in their family homes keeps them off the market driving up the costs for young families and everyone else in the market as a whole.
As far as a solution goes, I’m not a fan of a larger exemption. I would advocate a special account for home sale profits, kind of like an HSA or a 529, that could only be used tax free for qualified expenses like purchasing a home, property taxes, and HOAs. But anything that encourages older people to leave their too-large homes for something more suitable would help the market for everyone.
If you can’t get past “boo hoo rich people problems,” cut the numbers in half, or more. The problem persists. In California a profit in excess of 500k (250k for a single person) after decades of living in a modest family home is not at all rare. Many normal people who are not rich by any stretch find themselves in this situation.
My MiL was in this exact situation (selling and moving to a 55-plus community), and she is not rich. To make the numbers work I had to make her investments higher risk/higher reward than they should be for her age to allow for larger withdrawals. Luckily she has my wife and I to make up the difference if it goes tits-up, but not everyone has that luxury.
So in other words it is taxed substantially less than income… Even though it is clearly a form of income… Cry me a river…
You’re fucking kidding me, how does this count as a dystopia?
I know a way they could avoid those capital gains taxes…
It’s just nice reading everyone ripping this article to shreds. Thanks for making my day brighter.
Taxes are a percentage of profit/income/wealth. If someone is getting hit with nearly a million dollars in taxes I would argue that likely means they need to be getting hit with even more taxes. We tax the wealthy too little practically everywhere in the world, and one doesn’t get millions of dollars wealthy without systemic injustice - not even speaking about hundred millionaires and billionaires who should absolutely have 95% of their wealth taken away and redistributed to the public for the betterment of the species and the planet.
Im no fan of the .ml troop but this post deserve their presence. Shame they can’t see/post here.
In other words, their house would sell for at least 3.5 million. Where exactly is the problem?
3.5 million is the increase in value over what they paid. That means they were making well over $100,000 every year for the past three decades, and they are complaining about paying cap gains.
Fucking Boomers.
Although increasing the exemption amount to peg inflation does make sense.
Also, fucking Business Insider for running this obvious tripe.
Not surprising from an outlet created by DoubleClick founders and a guy who is barred from exchanges due to securities fraud.
Also capital gains on a primary residence should decrease somewhat over time.
These arent property speculators or people buying and parking empty homes. They are people who bought a house, lived in the community, probably raised a family and didnt move for 30 years and now want to downsize.
Ironically a property speculator could dodge this tax by buying a replacement property thanks to like-kind exemptions offered to investors but not private homeowners…
And will make a 3.5 million dollar profit from that transaction.
And?
If they have to pay taxes on that profit as if this was a business venture or investment they should be allowed to deduct 30 years of maintenance costs and loan interest as business expenses.
Uh… How is one’s house appreciating in value equivalent to making money? It’s impossible to access most of that money because, you know, they need somewhere to live, and according to the article the difference is supposed to pay for their retirement and healthcare. I have no idea how the math will turn out but 1-2 million for two 71 year-olds looking to live for 15-ish years in Southern California isn’t outrageous at all. The fact it seems outrageous is purely due to how completely fucked up everything has become for the working class over the past few decades.
You’re right, it’s not the same as regular income. Which is why a) we don’t tax the gains at the same rate as income and b) the tax is only assessed when the sale occurs.
And it’s not 1-2 million, it’s approx 4 million (4.8 minus tax) to go along with their social security income (according to the article) and presumably other retirement income
The fact it seems outrageous is purely due to how completely fucked up everything has become for the working class over the past few decades.
Which is why nobody here has any sympathy for their situation. They’re doing better than the vast majority of the population. At least they have 3.5 million dollars coming to them.
*3.5 minus however much they’ll need to get another home, move, etc, but more importantly: I’m not asking for anyone to sympathize with them, but the hate in these comments is both woefully misguided and completely unnecessary. Let’s leave dragging each other down to the crabs.
Lemmy users overwhelmingly don’t comprehend wealth. They think these people are some sort of scrouge mcduck mega capitalists.
They’re well off and have ample money for retirement… unless they need extensive healthcare which could still easily bankrupt them.
The fact they will do whats best for themselves financially shouldn’t surprise anyone.
That the best play is something which exacerbates housing issues by delaying downsizing is a real issue that most of the economically illiterate reactionaries won’t grasp.
They don’t want to contribute to society, even at a lower rate than wagies.
Just weeks after Republican Rep. Marjorie Taylor Greene introduced a bill to eliminate the federal capital gains tax on home sales, Trump said the effort could help juice housing market sales amid persistently high interest rates.
This is exactly the problem.
