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.
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.
It’s still only “up to 20%” 🙄
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.
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.
Plenty of folks are relying on the sale of their homes to pay for retirement, this couple in question is even an example of that. The big issue there is that it requires home prices to just climb and climb because they have to outpace each other(a sale of a home for this purpose will also need to buy the next home). The value of the home goes up with inflation but it also gets an additional increase because now it’s expected to help pay for 15-30 years of retirement, and the cheaper houses see the price range vacuum and seek to fill it not only because of greed but also because its sale will probably be used to buy the bigger, now even more expensive home. It’s shelter and we treat it like a luxury good.
Every time the price is referenced it’s used as excuse to raise prices elsewhere. It’s a feedback loop of greed fueled by the lack of a safety net and a lack of protections for both homeowners and renters. In Canada and the US things are extra bad because the demand in good cities is high but a lot of the existing housing, and even the new stuff, is production homes in “neighbourhoods” that are isolated, car-centric deserts and it’s still expensive.
That’s… actually an interesting way to slow down flippers.
Sounds like they can afford it if they’re rich enough to own that house.
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.
Growing desperate to move, the Friedmans finally put their house on the market in May for nearly $4.5 million.
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.
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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.
Probably bought it in 1946 for like $3k.
Nearer $3M as the first $500k is deductible, but mind those closing costs.
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 than not using a house you own.
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.
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.
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 threshold. 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.
I know a way they could avoid those capital gains taxes…
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 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.
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.
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.
It’d be funny if they died like a week after the sale closes and they move into the new community.
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?
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.
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.The first $500k is taxed at a lower rate, so they’re actually making more than that on the sale.
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
