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Oh, how horrible. /s
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:
This is the real reason they are not moving. They would be stepping backwards financially instead of stepping forward.
Feels like the crux of this whole thing is that housing shouldn't be an investment.
Good luck changing that. Housing has been a promised vehicle for wealth growth to multiple generations.
Or build more apartments maybe? The entire housing crisis in the US could be easily solved by adding sufficient apartments in the right places.
... What's the issue?
They paid for the next place, including fees, and still have $50k in their pocket? How greedy does someone need to be, exactly, before we consider the behavior repugnant?
The issue is that they sold a large home and bought a small home and had very little money left over. It doesn't make financial political sense to do that. They might as well stay where they are. There is little incentive to downsize.
Part of the solution to the housing crisis is solving that incentive problem.
Aww, poor them. They only had enough left over to pay fully for their next place and pocket $50k.
As long as you ignore property taxes and maintenance costs. Which normal people don't ignore.
Maintenance costs are probably fairly minimal given how little wear and tear happens in an empty nest. And property taxes for elderly folks are usually frozen or nearly frozen in place - meaning the next buyer will be paying a much higher tax on the same house because they won't qualify for those exemptions.
It seems like you don't own a home, so I'm not sure there's much point in continuing this conversation.
To the contrary - I own a large home in an urban area and it is filled with my children. But we don't have to have a conversation - I was only pointing out the flaws in your logic. My tax bill will be $12k this year while my elderly next door neighbor's will be a fraction of that. Our homes are identical (3k sqft over 3 floors). She's not leaving because it would make little financial sense to do so. This is quite common.
Sounds like one of those people that doesn't take a raise because it'll put them in a new tax bracket. People that don't know how the adult world works.
The have their new property paid for and also have a much smaller property tax bill and lower maintenance costs. There's still plenty of incentive to downsize.
Paying taxes on profit might hurt a little, but it's a good problem to have.
What? They would have a much bigger property tax bill
If their smaller new house is worth less than their original the property tax bill will be less. This is one of the incentives to downsizing.
That's not how property taxes work in California. They're likely paying way less than they would be if they bought a new house, even if it was smaller
Condos generally aren't much cheaper than houses. They would have the same issue if their region's real estate was half as expensive. They would have had this problem 10, 20, 30 years ago if they were retiring. If you sell a house in an expensive area and want money left over, you either have to choose a shittier house/apartment to live, or a cheaper area.
Their home is worth 2mil. They absolutely would not be stepping backward.
It's a ridiculous scenario considering the real value of their home. They might as well have invented a scenario where these people only get $100k for their 3000sqft, 5 bedroom home and then have to pay $2M for a one bedroom condo on the bad side of town.
That's a fictional scenario, though. Why would an entire house be selling for the same price as a tiny condo with HOA fees? These people have a huge house worth millions of dollars, so I'm confused why they would use a $500k sale price in their hypothetical scenario.
Sure those are made up numbers but they illustrate a real issue. Where i live, and I’m sure other high cost of living areas, it’s the land that’s expensive, in short supply. The actual house might be a much smaller part of that.
What that turns into is prices may be insane, but a house isn’t much more than a condo isn’t much more than a vacant lot. Then when you buy, taxes are reset to the new value, so property taxes will now be much higher and realtors commission will be insane. So they need to take a mortgage and take a cost of living hit on the taxes, then are clobbered by high interest. They may literally not be able to afford to downsize
Haha, I mean I get it... Giving away money to uncle sam sucks but I agree with your sentiment. They are coming out ahead, that house was an investment that is paying dividends. I am hoping to have that problem some day!
Contributing financially to the democratic society in which you spent the entire time of gaining monetary value able to vote which enabled the increase in value of your property? That’s the thing here, this isn’t throwing money away, and it isn’t imposed without your say. Taxes aren’t fun, and we don’t always like where they go, but as adults we should be able to respect them. They’re part of how our society functions and a necessary component of many nice things we need in order to prosper.
This long time anti tax attitude in this country is part of what destroyed our infrastructure, ruined our regulatory bodies, and contributed to our massive wealth gap.
To be fair, it wasn't the attitude that destroyed the infrastructure. Despite people's attitude toward taxes, they still paid. The problem is precisely that they don't like where that money is going. In most cases, their taxes are just funding a trust fund baby's extra paycheck while they sit in office and neglect their duties while discussing divisive politics to distract from the fact that they are robbing the American people. A lot of people aren't against the idea of paying taxes, but rather America's inability to appropriately spend money on the common good.
That attitude that the majority of taxes go to paying politicians is part of the issue. Yeah politicians suck and many are overpaid. The military is too. You me and everyone else knows these will be cut after infrastructure and welfare. Fighting for tax cuts then becomes “I don’t want to pay for infrastructure or welfare”. And seriously look at anti tax sentiments, they’re often anti welfare or anti government assistance.
Isn't this where the boomers use a 1031 exchange and convert the large home into a smaller luxury condo for themselves and a few lower income units to rent out to struggling Millenials?
I forgot about all the people howling and foaming at the mouth about the "death tax". Boomers gonna boomer I guess.
Rent it, buy a new house, die, and the tax threshold on estates is $2 million.
On the other hand; would you personally make that choice if you were in their situation? I am willing to bet you, nor any other reader, would not. While that doesn't excuse the greed aspect of it; it does cast at least some light upon why they are refusing to sell and take a loss on it.
If you only paid $100,000 and you made $1,000,000; you'd have $900,000 profit; of which you'd probably only see ~60% to ~40% of, if Capital Gains taxes are anything near what I think they are. If we assume a "worst case", where the Federal Government takes 40% and the State takes about 20% more, that means your tidy profit is only about $390,000. That means you've probably got to secure another $140,000 in financing on average to pick up a more modest $500,000 home (in today's market) to retire in.
But villainizing the boomers isn't going to solve the housing crisis easier either. We legitimately need more homes. We. Need. Them. Yesterday. So maybe the policy needs to lean towards bigger developments that cost less. We did it during WW2; where massive amounts of homes were built cheaply. We probably need to achieve that again, and do better than we did during a war that was diverting supplies away from the effort.
How do we achieve that? I don't know.
Capital gains taxes range from 0-20% Federally, depending on your income. In Cali, the addition is up to 13%
Which means that worst case scenario, you sell a property in Cali, you would pay 33% of the profiit above the original price of the house and the 500,000 exemption. So on a house you bought for 100,000 and sold for 1,000,000, you'd pay the awful, awful price of... 133,000, leaving you with a paltry $867,000.
Ah; but did you forget you pay income tax on top of capital gains taxes?
You literally don't for long-term capital gains.
nor does the capital gains affect your 'regular' tax bracket.
Lol holy shit I can't believe u said something this fucking stupid....hahaha
Have you tried learning how something works before forming an opinion on it?
Capital gains are capital gains not income (earned wages), so no they aren't taxed as income which is why they're called "capital gains taxes" and not "income taxes."
capital gains tax rates are a lot lower than that. https://en.wikipedia.org/wiki/Capital_gains_tax#United_States
these people are mostly greedy fucks that don't want to pay their very reasonable share of taxes on their investment return.