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?
The first $500k is taxed at a lower rate, so they’re actually making more than that on the sale.
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.
Growing desperate to move, the Friedmans finally put their house on the market in May for nearly $4.5 million.
Your home listed at…$4,500,000 is going to cost you $700,000 in taxes? Cry me a river straight to the bank with your remaining $3,800,000. I hope they raise the tax.
Ohh no they have to pay taxes? Was this written by a toddler?
I swear to go, people are so disgustingly greedy i have little hope without a thorough revolution.
I mean,
While the Friedmans have done well financially, they’re relying on the profits from their future home sale to help fund their retirement. They’re concerned that Joel’s Social Security checks and Kathryn’s pension won’t be enough to cover healthcare bills and long-term care as they age.
Add in buying a new house and moving costs and it makes sense why they’d be hesitant. Retirement and housing are expensive.
Selling their house for $4,500,000 and paying $750,000 in taxes still leaves them with $3,750,000 for an over-55s, healthcare, and investing.
I think the multi-millionaires will be fine.
And they won’t pay that unless it’s a second home and they don’t buy and take in capital gains.
Let’s say I want to sell my (cheaper) home and buy another one — the same type of house, but I want to move. Well, I can’t, because as soon as I sell it and get taxed, I can’t afford to buy a house anymore. These aren’t landlords. We’re talking primary home residence.
For the people downvoting me: as average home prices increase in value you will eventually be unable to sell your home and move anywhere else. We went from $200k average home prices to $500k in just a few years. Ordinarily you would sell your current house and buy another one, but with this tax you can’t afford to do so. You’re locked in forever. Welcome to a shitty housing market.
That’s not how this works. Not how any of this works at all. God damnit people need to keep their traps locked shut.
If you keep a profit from the sale, you get a tax on the profit at the end of the year.
Even if you use the proceeds to immediately buy another house, you still have to pay the tax, unless you are a landlord then you get a tax break, because we must protect those landlords but not private homeowners…
So you may be at a 15% or so disadvantage looking for a new place to live if you wanted to sell your property and move.
No you don’t get taxed at sale and even if you did booo fucking hoo. If you’re sitting on 500k+ in gains after downsizing then eat it and pay the tax. I’ll play a sad violin story for the top 2% in the richest nation in the world.
I can’t move because of these taxes 🙄 fuck off with that circle jerk
You’re fucking kidding me, how does this count as a dystopia?
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.
I pay zero taxes if I were to sell my house. Because I don’t own a house, I can’t afford one. I’m forced to rent.
My boomer parents constantly complain their pension is shit. They have to watch their spendings, they tell me. They live in a big house, surrounded by water and nature (in the Netherlands, so expensive AF), with a sailing boat AND an expensive motorboat in front of their house, an SUV and caravan, they completely remodeled their garden including expensive fences, they go on holiday about 5 times a year, they got solar panels and heat pump installed, got a new kitchen, bathroom and toilet, expensive automated sun screens for all their windows (all around the house). But they are treated like shit with their poor pension. My dad bought his first house when he finished his studies, my mom never had to work anymore as my dad made more than enough to support a household of 5, we always lived in middle class neighborhoods, we went to private schools. But they complain they have to buy fuel to come visit me, so they rather have me visit them instead. I live in social housing and struggle every month paying my bills. They never gave me a penny as soon as I left the house as I’m a major disappointment, even though I’m financially and mentally struggling (autism, ADHD, PTSD). They even changed their will because I’m such a disappointment so I will get the bare minimum and my perfect younger brother gets almost everything even though he makes loads of money every month.
I don’t give a fuck. I don’t want anything from them when they die. I’m not complaining about not getting anything. I’m just complaining their love for me is measured in success and that they are privileged fucks who constantly complain about their sad rich lives while many others are actually struggling and they don’t give a fuck about them. They are an example of what’s wrong with society. I broke off all contact with them. Fucking boomers. They even turned full right wing racists even though their parents and grandparents fought in the resistance during the second world war and got deported and tortured to death by the nazis in concentration camps.
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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…
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.
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.
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.
