this post was submitted on 30 Jan 2024

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Boomers wanting to downsize face huge tax bills (www.cnn.com)

submitted 10 months ago by MicroWave to c/news

165 comments fedilink hide all child comments

After 33 years and four children, Baby Boomers Marta and Octavian Dragos say they feel trapped in what was once their dream home in El Cerrito, California.

Both over 70, the Dragos are empty nesters, and like many of their generation, they’re trying to figure out how to downsize from their 3,000-square-foot, five-bedroom home.

“We are here in a huge house with no family nearby, trying to make a wise decision, both financially and for our well-being,” said Dragos, a retired teacher.

But selling and downsizing isn’t easy, appealing or even financially advantageous for many homeowners like the Dragos family.

Many Boomers whose homes have surged in value now face massive capital gains tax bills when they sell. This is a kind of tax on the profit you make when selling an investment or an asset, like a home, that has increased in value.

Plus, smaller homes or apartments in the neighborhoods they’ve come to love are rare. And with current prices and mortgage rates so high, there is often a negligible cost difference between their current home and a smaller one.

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[–] friend_of_satan 39 points 10 months ago (48 children)

If it was just a problem of paying more taxes then the argument would be bullshit. The main problem is buried at the end of the article:

A homeowner who keeps all the profit of a home that sells for $500,000, for example, may find that a condo in their same area, where they can age in place, is $450,000. After calculating realtor fees and closing costs, the profit hardly covers the new purchase, let alone provides any extra income for retirement.

This is the real reason they are not moving. They would be stepping backwards financially instead of stepping forward.

[–] ComradePorkRoll 65 points 10 months ago (16 children)

Feels like the crux of this whole thing is that housing shouldn't be an investment.

[–] [email protected] 2 points 10 months ago (13 children)

How could it be changed so it wouldn't be?

Land is mostly a set resource with new developments and cities slowing. Home development follows land and while there's been a boom, overall it's been slowing. As there are more people, demand for housing increases.

All of this drives cost of homes up. So the longer you are in a home, the more it and/or the land it worth. Usually outpacing inflation. So when you sell, it's worth more. It's an investment by default even for those people who own 1 normal-sized single family home. It was an investment even when housing prices were reasonable decades ago.

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