Boomers are not moving out of their big homes, here’s why | CNN Business
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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.

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.

  • partial_accumen@lemmy.world
    871·
    9 months ago

    The only way they pay cap gains is if this is a second house

    Not the only way. There are several different ways you might have to pay cap gains on a home that isn’t a second home.

    But for the article its likely this way they have to pay:

    “Both the IRS and FTB provide a capital gains tax break for home sellers who meet certain conditions. The maximum amount of capital gain that can be excluded is $250,000 for single filers or $500,000 for a married couple filing jointly.” source

    From OPs article:

    “The taxable gain of $1.4 million at 20% would mean those homeowners are facing a $280,000 tax bill. In a state like California with additional tax, the overall payment would be over $450,000.”

    They bought the house at $100k, and are walking away after taxes with $1.55m. Boo hoo? They’re saying they get a big tax bill because of inflation, but they’re also able to sell their house for 19x what they bought if for for similar reasons. If they want to sell it to me for $600k and have zero cap gains taxes, I’ll take them up on that offer.

    • SeaJ
      40·
      9 months ago

      They also spent years reaping the lower taxes from prop 13 which saw their property taxes only raise by a max of 2% per year.

    • AA5B@lemmy.world
      3·
      9 months ago

      It’s truly an insane housing market, but can they even afford to downsize? I have no way of judging the cost there, but certainly here there is less than $450k difference between a typical house and a 2-3 bedroom condo. Since ts the land that scarce, smaller places go up in value along with the larger, so you never know.

      In a much lower cost of living area, when my Mom downsized from the big house I grew up in, she both took a sizeable gain and yet still had to take a mortgage to buy a 2 bedroom condo to replace it