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.
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In other words, their house would sell for at least 3.5 million. Where exactly is the problem?
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.
They don’t want to contribute to society, even at a lower rate than wagies.
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.
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.
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.
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.
It’d be funny if they died like a week after the sale closes and they move into the new community.
Normal rich folk give the house to their children to use and buy something in a retirement community with their children’s support. None of their children live with them, kind of a red flag the author buried.
Make $3,500,000 in profit and you get upset that you have to pay taxes on your 3.5x return on “investment.”
If you can’t cover <$1M in taxes from the sale of your $4.5M home maybe you should live within your means or get a roommate to help cover the bills like a normal person or something.
There’s an alternative out, and one I think most people would object more to from a fairness perspective.
Selling their house means they lose out on a ton of the value, so don’t sell, rent it out and have the current tax code coddle you because the tax code heavily favors being a landlord rather than selling the house.
It’s busted that we actively encourage people to lock property up as investment because using a house you own is more expensive not using a house you own.
There’s nothing even remotely unfair going on here
Couple are set to make $3.5 million in profit, are asked to pay tax, say no and greedily hoard their asset some more and cry about the hardship.
Fuck off.
They should be asking themselves why they haven’t done more to give back to the society that gave them so much, but instead they’re whining about a meager 20% tax on staggering profits. Instead of lowering capital gains, it should be raised, over a certain threshlold. Hell, we should be taxing the wealth they just have sitting around so that we can show wealthy people like these two shameful selfish pricks what it feels like to really contribute.
If taxes go down, prices can go up even more.
Can y’all like think for five minutes before you get hate boners when you see the words “million” and “dollars” in a sentence? These are two old people trying to move houses post-Covid in California; worrying about nearly a million dollars being shaved off their retirement is a very reasonable concern. The fact that you don’t have this kind of money to retire is because you’re being fucked over, not because they’re hoarding money.
If California is too expensive for them why don’t they move somewhere within their means? Get a roommate? Stop eating avocado toast?
Note while the amount is dramatic, the same general principle applies for a widow selling their 500k house that was 100k and being out 80k in taxes and stuck having to get living arrangements for 420k in a market where her house sold for 500k.
Particularly egregious: if a landlord sold the same sort of house they could turn around and buy a different 500k house with zero tax burden. This exemption is not available to private homeowners, only for investment properties you don’t live in. We give a tax break for using houses as purely financial instruments but penalize people actually buying for themselves.
Your widow would only be out 30k, not 80. There’s a deduction for primary home profits.
The 1031 like-kind exchange you’re talking about is only a deferment. It’s more available yes, but if that exchange chain is ever broken all those taxes need to be paid
You are right about 30k instead of 80k, my mistake, but still a fair chunk of change.
The deferment is reasonable, but it’s insane that an investment property can be traded in without taking the tax penalty, but you can’t do that with a residence.
You jest but that’s exactly my point. This logic is messed up when it’s applied to anyone, so it’s messed up when applied to wealthier-than-average-but-not-outrageously-so retirees.
I’m sorry, but if they have three million dollars left after taxes when they sell their house, they are extremely wealthy. Three million dollars is easily enough to support a couple their age for the rest of their lives.
And I was actually serious when I said “live within their means” – if three million dollars is too little to live on in California, they can move somewhere cheaper.
3 million is not extremely wealthy. You’re comparing upper middle class retirees to people who own multiple yachts worth more than this couple’s biggest asset
Three million dollars is easily enough to support a couple their age for the rest of their lives.
If they already have a house, otherwise the math changes dramatically. In many parts of California the median house costs more than one million dollars, and a retired couple needs a little north of a million per decade to live with a “normal” quality of life in California according to Google. That’s three million right there, before you get into any of the million things that could require significant sums of money a retired couple could face in their remaining 15 or so years of existence.
if three million dollars is too little to live on in California, they can move somewhere cheaper.
Why should they? Hell, why should anyone? If they want to stay in their home state, why should they be forced to leave? People have a right to live, and the fact that that right is denied to too many people is no excuse to deny it to everyone else.
They’re also missing the point that if people like this aren’t selling their homes that can’t be good for the housing market as a whole.
I think that if you only own one property it would make sense to pay the tax on gains at the end of the fiscal year. If you sell $3.5m house and same year buy a smaller $2m house you only pay 20% of the $1.5m you actually gained. It’s idiotic that simply moving somewhere can cost you 20% of your house value, even if you moved to house of equal value and haven’t made any money… If you own more then one property you pay 20% of the sale profit like now.
For a couple, the first 500k of profit is ignored from the sale of a primary home lived in for at least 2 years. Which is more than an 11% break on their tax bill if they had gotten the house for free.
(So sale price of house - original full cost of house - 500k deduction ) * 20%
Oh jesus fucking christ… sell the damn thing. They’ll still walk away with $2.8 million in their pockets that they can’t currently spend. They’re just being stupid greedy fucks who can’t bear the idea that it could become even more valuable if they wait longer.
Nearer $3M as the first $500k is deductible, but mind those closing costs.
Probably bought it in 1946 for like $3k.
Yep that’s how taxes fucking work
The unfair part of this is that the $500k threshold for the tax hasnt been updated since 1997.
In 1997 the average price for a house in California was about 180k now its $800k. If the tax was the same ratio it now wouldnt apply until the house was worth about 2.2mil (napkin math, I’m not getting out the calculator) Now I’m not saying they arent crying about a problem many of us would kill to have but thats a difference of about $340,000 in taxes.
They knew the limit when they bought the house. And it’s gone up more than they could’ve dreamed. That’s plenty fair.
Problem is their house went up by a huge percentage, but so to has every housing arrangement they will need.
Maybe not a whole lot of sympathy for someone having to sort out living arrangements with ‘only’ $2.8 million or so to work with, but this can scale down to pretty ‘normal’ house prices like $500k.
And how much have wages gone up? $500k is still very expensive, sounds like maybe it should be a little more but it sounds more like a consequence of letting housing prices run away for a few decades.
Either you shouldnt be paying any capital gains on a primary residence full stop or it should be on a sliding rate over time. (20% for first year -1% per year after)
Buying a house (even a mcmansion) and living in it for 30 years isnt a hustle or an investment strategy… its just living.
That’s… actually an interesting way to slow down flippers.
Keep in mind, it’s profit. If you bought the house for $500k and selling for $800k, that’s only $300k in profit. Plus you can include the cost on renovations and there are lower percentages when you own and live in the house for over 2 years.
It’s still only “up to 20%” 🙄
Boomer couple is doing boomer things.
Oh God Gen X couple can’t sell second home 🙄
Edit: oh God I actually read and figured out what this moron is posting.
These people won’t even pay that much tax. This is some dumb ass, “I don’t know how capital gains works” shit. That 99% of you would support if this engagement bait wasn’t posted.
What makes this even worse is the article doesn’t mention all the money this couple saved by not paying rent for the duration of their home ownership. So not only would they make profit on the sale, they didn’t have to pay rent for all those years, and instead got to keep that money, which puts them at a much bigger financial advantage than folks who can’t afford a home in the first place.
