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.
So in other words it is taxed substantially less than income… Even though it is clearly a form of income… Cry me a river…
Where exactly is this a dystopia? The part where rich people too have to pay taxes?
I guess you’re mistaken, /r/aceoandultrawealthydystopia is a different sub.
The fact that the house is woth that much in the first place. Thing is owning a single home doesn’t make you rich, since you need a home to life, you can’t get that money unless you’re willing to downgrade. Now these people are, but the tax is limiting their options. Real estate should be taxed while you have it, not when you sell.
The tax is only 20%, like you get to keep the other 80%. That sounds pretty good to me.
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.
Plus they’re in their 70’s. Pretty sure 3.8 mil will last you the rest of your life.
I’m in my 30s and could make 3.8 million last me the rest of my life. Even if I wasn’t good at investing and just put it in an interest checking account earning 1% interest, it would earn 38,000 a year. Which is right around what I make now. There’s two of them, and you do have to account for inflation, but it really wouldn’t be difficult to get 2-3% return on that and still be able to live off the interest alone.
Not if you need it to buy a house.
these capital gains taxes are ruining my life! I can’t sell any of my assets without paying a small fee! aaaggh!
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.
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.
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.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.
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.
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.
I wish the boomers would just die already. At this rate I’m going to live my whole life under their greedy little thumbs
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.
Sounds like they can afford it if they’re rich enough to own that house.
Capital gains tax of up to 20%.
What’s 5x 700,000 ?
“The Friedmans finally put their house on the market in May for nearly $4.5 million”
Cry me a fucking river, boomers.
Yeah, and the tax is only on the profit they make, not the entire selling price.
And any capital improvements will lower that ‘profit’ too. So anything from a new water heater to a new roof can be used to raise the cost basis of the home lowering the tax paid.
Enough that they shouldn’t fucking care.
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.
I guess all the boomer parents are like that. I have a really good relationship with my parents, but they wouldn’t help me out when my boyfriend and I bought a flat. Went as far as telling me that I’m trying to rob them, because maybe I can’t afford the flat and then the bank will take their houses. I told them the bank just can’t do that and they didn’t believe me until they went to talk to a lawyer. And best part is, now they always say I’m not thankful because I will inherit their houses and they build them for me? And their parents were really poor small scale farmers, still they saved up to help them with their first home. As you can tell I’m still bitter about that.
I know some proper boomer parents but they are rare AF.
My parents paid everything for my perfect brother when he went studying. He had a luxurious life as a student.
I failed in school, because I was special (autistic later turned out) but should have acted like nothing was wrong. So I didn’t get a penny when I couldn’t eat for a week because I was completely broke. Instead they told me. To get my shit together, act like an adult for once and take responsibility for my actions.
So far they never acknowledged they ever made a single mistake, they project all their mistakes and failures into me or others, they complain constantly like spoiled entitled teenagers and they do nothing but judge people who are less fortunate.
I’m 38 now, they still tell me I’m behaving like a child even though I always say sorry for the mistakes I make, I always take responsibility and acknowledge when I’m wrong. I fought in wars (in the military), I have fought mental health my entire life, I struggled within the system my whole life, I have loads of friends who I’d die for and who’d die for me, while my parents have no one and are just a bunch of entitled sour lonely fucking boomers. Who’s the responsible adult here? Although I doubted myself many many times, my therapists and friends have ensured me it’s them, not me. And I started to see that too, so I ended my relationship with my parents for good. And with my entitled little brother who always takes my mom’s side no matter what.
At least you got out of that horrible family dynamic! Don’t know if I can judge from one comment, but sounds like your wellbeing didn’t benefit from the relationship and am happy for you that you’re doing better for yourself. And of course there are some nice boomers but even if I have the nicest, most loving parents they just seem they don’t care about the future of their kids and next generation while the generations before tried to make their kids’ lives better.
Lol. Yeah sounds like the typical boomer. Never learned what a worry is yet constantly complaining.
Like I always say “I complained to have no shoes until I saw a man with no feet”.
Anyhow. I’m sorry my dutch neighbor. Parents like that are a PITA. Mine were like that too. What a failure i am. Then I became successfully and they both, having no spine at all, couldn’t resist the offer to be employed by me. And after they learned how cool it could’ve been, and what a dream of an employer I was (work whenever wherever you want, but please get the shit somehow done, from cleaning stuff to CEO), I fired them and replaced them with, in their eyes, “horrible failures that only weakens the country!”. Their last month working was showing the news guys the ropes.
It felt great, but, to make a point relative to your story, they didn’t learn shit from it. Even being on welfare didn’t change them. Quite the contrary, now I wasn’t a failure anymore but the epitome of evil incarnated and the sole source of all their woes. You probably either are an arse or you’re not. So fret not, just cut them out of your life. Basic rule of life: remove toxic people from your social circle. No matter if family (blood) or not.
And get whatever money you can from them. No matter what fucknuggets they are. Money isn’t dirty and has no inherent value. Take what’s yours when you can. Here it’s at least 25% if they disowned you, guess it’s not much different in NL.
My mom is the same with the completely outrageous spending on frivolous things but as soon as it comes to visiting me, a 2 hr plane ride, suddenly she guilts me for spending the money. “ I have to stay with you for 15 days because I paid for this $200 ticket and it’s just not worth it if I stay just a couple days like you say I should “ — I’m autistic and NEED my routine and space back after 5 days maximum. She loves to push boundaries to get what she wants : a free stay at my home in a vacation state. I’m constantly telling her no you cannot stay with me for 2 fucking weeks because you feel entitled and live for pushing boundaries.
I’m very fortunate to have found a house while prices were affordable for me. If I had to attempt it now, I’d be up shit creek. Meanwhile she is building a custom 7,000 square foot home, because of course her 4,000 one is just not cutting it anymore … the garage isn’t pretty enough for her $80,000 suv she randomly wanted AND my step dads $100,000 truck he needed afterwards to match her new car … fucking ridiculous.
Like I said in my reply to this commenter:
Basic rule in life: cut toxic people out. If someone, let alone a fucking PARENT, treats you like that, and especially if they don’t respect or at least acknowledge your neurodivergrnce: just fuck them. Maybe in your case, play along the absolute bare minimum until you can inherit their shit and then smile. At least you were not the idiot anymore.
Friends, or even random people who have nothing to do with you, shouldn’t treat you like that. We often just endure all shit because… Well, because it’s just like that and we never really knew it could and SHOULD be different. Or other silly reasons.
Sadly it took me way to long to let go of the constant argument people with a good relationship with their parents tell me: “but they’re your parents dude!”
Exactly, they are, I didn’t chose them, unlike my friends who actually treat me with respect and dignity. Fuck toxic family, fuck toxic people, surround yourself with people who love you for who you are and who you love for who they are. Treating each other with mutual respect. Fuck manipulative narcissistic behavior. Even when they are your parents.
Yes absolutely this. I’m glad that this sentiment is seen more and more in the younger generations. They won’t bend for jobs or abuse that easily like mine (genx) or earlier did and still do.
“But they’re your parents!”. Aaand? “dad” or “mom” are titles earned by love not labels given by birth. Toxic is toxic. Fuck it.
They demand to be repaid for raising you. We didn’t chose to be put on this fucking world. They chose kids, it’s their responsibility. We owe them nothing. “But we love you.” Then fucking show it instead of making our lives miserable. Give love, get love back. Give shit, demand love back? That’s not how it works. “But everything we do, we do with good intentions.” Impact weighs heavier than intentions. They prioritize their own wishes over the happiness of their kids. I hate religion, but I like the expression “the road to hell is paved with good intentions”. Something especially boomers will never understand. And sadly many more in this world. Compassion and accepting others for who they are, the way they are and want to be, are sadly rare these days. My goal in life is to show it still exists. And I have many good friends because of it.
My parents live 2h drive away and are already guilt tripping me for that drive. While they would come to me 10% of the time, I had to go there 90% of the time. I’m autistic too, my mom drains me within an hour. No joke.
Goddamn, with their parents’ history, I cannot possibly think of this as anything but mental decline. The basis of their political affiliation is a reflection of the state of their brain, to be sure.
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.
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.
Nearer $3M as the first $500k is deductible, but mind those closing costs.
Probably bought it in 1946 for like $3k.
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.
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.
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…
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.
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.
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
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.
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.
Business Insider so basically yes. I’ve never seen a “news outlet” blow business people as hard as them so I guess the name fits.
Problem is, many people do not see the lunacy and think taxes are stealing while it is at the moment the only way to take at least a share from the wealthy and give it to the poor.
But people hate the poor and needs. “Those lazy fucks deserve what they got” seems to be the spirit of the people i have talked to.
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.
It’s almost like housing shouldn’t be a retirement plan.
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.
Okay disclaimer: I believe having to pay any kind of tax on your primary residence is messed up, so I’m more than a little biased here.
As far as I’ve been able to find on Google, retirement in California runs up to about 1 million a decade. With a generous estimate of 20 years remaining for both of them, you’re looking at 1.75 mil for buying a home, moving, assorted emergencies, end of life care, inheritance before you factor in anything they might actually want to do with their remaining lifetimes. That’s… not really a lot. I mean hell, the median home in San Francisco is 1.5 mil. It’s certainly possible to cut costs here and there to make it work (particularly by choosing a house on the cheaper side) without having a below-average retirement, but at this point we’re talking about retired people wanting a good location and quality of life and maybe some financial freedom for their retirement, not evil rich people hoarding money. What I’m trying to say here is that working class people (indeed, everyone) should be allowed to want this stuff, and not denied it because the government would rather take their money than tax the filthy rich. I’m speculating here, but I doubt any of this is radically different from what would be considered normal, maybe on the better side, 50 years ago. Capitalism has managed to convince people that they’re not entitled to this stuff, but they are. You, me, the couple in the article, we’re all entitled to a good retirement with financial freedom; just because not all of us get to have it doesn’t change that fact.
This assumes the people who had the means to obtain a 5,000 square foot house in Southern California, which was still a costly prospect even 30-40 years ago have absolutely no means of retirement planning aside from their home.
Given their social status they are far more likely to have well funded 401ks and given their age they are even likely to have access to pensions (edit: they def do!), a pipe dream for the millennial and younger.
They can pay their fucking taxes. Maybe shop at Neiman Marcus less, buy a few less Lacoste shirts and tighten your purse strings like the rest of us. I probably won’t ever retire and I certainly won’t ever fund the building of a house worth 1.8million in 1990 dollars
In fairness, buying into those retirement communities aint cheap either. They know that people looking to move into them are usually selling an older and much larger home and can afford to pay a premium.
And they won’t pay that unless it’s a second home and they don’t buy and take in capital gains.
they have a pension and nearly $3M in cash coming in from the sale (after tax)
if they have money issues at 71 with that situation, boohoo
If 3 million are not enough i very much doubt the 750.000 would make a difference.
That’s the difference of $26,250 per year to spend without risking digging into the principle.
How so? Assuming a total of a million and a half for buying a house, moving and whatever else they need to do before actually moving in, that’s about 2 mil for two retired people looking to live 15-20 years in California (subtracted 1 mil from 4.5 mil). The difference 2 mil and 3 mil or even 2.5 mil represents a massive change in quality of life, financial freedom, etc. Note that a moderate standard of living as a retired couple in California costs about 1 mil/decade*, so the extra money means they can have something for emergencies, to leave as inheritance or whatever else someone might want to do with money. I certainly wouldn’t gamble on having to live the last years of my life stony broke.
*This is likely going to get even higher with Trump et al ruining everything.
So you are saying they will be able to buy a new house, move and then have some left over from the money they got due to selling their old home? Well how are they paying for everything right now
At the end of the day i doubt that we have the same views about fairness at all. I am happy for them that the piece of land that they bought ages ago is now worth a lot. There are however many more losers than winners with this development, so maybe forgive us for not feeling sorry for the winners having to share some.
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.
deleted by creator
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
As a private homeowner you want to trade your $500k house to move near an adult child after your spouse dies. With the housing markets being equal, you end up owing a ton of capital gains tax but having to spend more just to try to keep even.
Or, as the tax code seems to want to encourage, the private homeowner becomes a landlord because that at least might let them keep pace with a new mortgage they have to take on.
It’s crazy that we give tax advantage to landlords and deny them to people actually using their houses.
The “profit” is realized as soon as the sale goes through. Your financial illiteracy and the confidence with which you wield it is astonishing.
The first 250k (500k for a couple) of profit from your primary residence (if lived in at least 2 years) is excluded from taxation.
To explain in a nicer way where your error in thinking is:
You don’t pay the taxes specified in the article on the whole amount of money you get for selling your house, only on the increased value compared to when you bought it.
So as example: you buy the house for 1 million and sell it later for 2 million. Then the tax in the article is only applied to the 1 million difference, so you only give away part of the money that you got in addition to the value you bought the house for. So you always end up with more money than you paid for the house, just not the full value.
Right but the rest of the housing market has also moved on. The cost basis of that house won’t come anywhere near buying equivalent housing in the present
Let’s say you bought a decent house back in the day for 100k, and now that house can go for 500k because it’s a typical family home and all those homes are now 500k.
Let’s say your spouse dies and you could stand for a different house, maybe closer to a family member that can help take care of things. You can sell your house for 500k, but you are left with only 420k that you keep. Sure you could easily afford 100k homes if they still existed, but now homes cost as much as you sold yours for.
The real kicker is there is a like-kind exemption that would negate this, but it’s not allowed for your actual primary residence, only as an investment property. Landlords are protected from this but residential homeowners are not.
I don’t have an error. If you buy a house for $200k (average price for houses in the US some years ago) and it now costs $500k (average price for houses in US today), this tax makes it LITERALLY impossible for you to sell your house and buy another one. This is a new phenomenon.
That part is normal?
For real estate there is always a loss involved. Because multiple people and their work are involved and the state also wants their taxes of course. What you want seems to be ‘government not involved’ market of real estate and I’m not really a fan of unregulated markets. They tend to fuck us normal persons even more.
The discussion for this article is about downsizing the house and that is definitely possible, even after paying that tax.
You think it’s normal to lock the US population into place, decrease housing market liquidity, reduce inventory, and drive up home prices?
Here’s what I think is normal: the primary residence, which is traditionally the primary stock of wealth for the working and middle classes, should not be taxed. Period. Your second house should be taxed. Your third house should be taxed. Your huge boat should be taxed. Not your home.
People need to stop their war on the US middle class, which is rapidly disappearing. The majority of the wealth is in the hands of the top 1-10%. Not the middle 50, or the working poor, who are the most impacted by this moronic tax.
Behold, the impact of property taxes:
