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.

  • Neato@ttrpg.network
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    10 months ago

    I think the issue is that with mortgage prices and the incredible costs of homes in California, capital gains tax comes into play for them when the vast majority of homeowners never even consider it.

    So you have people with a large single family home wanting to sell and move into a small single family home (1-2bed) or even a condo and they end up with no benefit from doing so and potentially even an expensive mortgage. Essentially they are selling an Escalade to get a Civic and breaking even, which seems odd.

    I think the capital gains tax exception should be expanded to be waived for single family homes under XXXX sq ft, with the above stipulations (living in the home continuously). It’s not these people’s fault their neighborhood shot up in price outpacing regulations meant to protect normal home owners.

    Their only real out in this situation is to move away from where they’ve lived their whole lives.

    • Szymon@lemmy.ca
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      10 months ago

      Waive tax for primary residence, tax the everliving fuck out of non-primary residences to the point nobody wants to rent them out anymore.

    • Dr. Dabbles@lemmy.world
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      10 months ago

      think the capital gains tax exception

      Nope. No exceptions. You made money for doing no work, you pay taxes on that money. Plain and simple. Cap Gains tax rates are already absurdly low, so frankly anybody asking for a further reduced rate or exception is already a greedy pig not worth listening to.

      • Neato@ttrpg.network
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        10 months ago

        I see you’ve never sold a house. If you do, have fun losing 15% of that value. The only way to prevent that is for your house to not accrue any value while you lived in it.

        • Dr. Dabbles@lemmy.world
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          10 months ago

          Cry to someone that gives a shit. Be less greedy. I’ve paid my share of capital gains, you don’t see me crying like a greedy little piggy about it.

            • Dr. Dabbles@lemmy.world
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              10 months ago

              Seems like plenty people agree taxes should be paid. In fact so many people agree that it’s a law. Your greed will never fill that void, btw.

        • ShepherdPie@midwest.social
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          10 months ago

          You can actually deduct the cost of any improvements you’ve made to the home. You can’t do much about inflation costs, but are you really arguing that it’s bad to only receive 85% of free money rather than 0% by not selling?

          • Neato@ttrpg.network
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            10 months ago

            Except you aren’t just selling. You also have to buy. And if from the tax and high housing prices it’s a wash to downsize, there’s not nearly the incentive to.

            • ShepherdPie@midwest.social
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              10 months ago

              High housing prices also mean a high selling price for you too and taxes being percentage based means there’s never a scenario where you wind up with less money than you would from selling a smaller, cheaper house because regardless of where you are, bigger houses sell for a lot more than smaller houses. The only scenario where this makes sense is if you sold a large home in a place like rural Oklahoma and moved to a shoebox in San Francisco, but that’s not what’s being described in the article.

              • Neato@ttrpg.network
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                10 months ago

                You’ve missed the point. People are breaking even downsizing. That’ll mean they won’t. It goes over this in detail in the article.

                • ShepherdPie@midwest.social
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                  10 months ago

                  If I’ve missed the point then why can’t you explain how big houses are selling for nearly the same as small houses to the point where people are breaking even going from 3000sqft 5 bedroom homes to a 1200sqft 2 bedroom? A 15-20% loss from capital gains over 500k isn’t going to do that nor is an additional 15% tax from California.

                  The only possible scenario where that makes sense is if you’re comparing a $500k home from a married couple to another couple with a home valued at 30% over $500k. For those people, they’re going to receive the same as the couple who had $500k in capital gains. This is a math problem so you can’t just waive it away with “my opinion is different and you missed my point.”

                  The example in the article is absurd as a single family home with property isn’t going to sell for slightly more than a condo unit in some giant complex. That’s why they had to rely on an example with made up numbers. If you look up a home their size in El Cerrito, just outside San Francisco, you’re looking at $1.6M while a condo is going for $400k. Surely they could afford a $400k condo with $1.37M in profit.

                  • Neato@ttrpg.network
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                    10 months ago

                    So now you’re doubting the article because you’ve got nothing else. Cherry picking numbers so you don’t have to face the arguments presented.