The first 250k (500k for a couple) of profit from your primary residence (if lived in at least 2 years) is excluded from taxation.
Comment on This boomer couple would be hit with $700,000 tax bill if they sold their mansion
yeahiknow3@lemmings.world 3 weeks agoYou’re completely correct. In this particular case. BUT, let’s say I want to sell my (cheaper) house and buy another one — the same type of home, 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. Kind of dumb.
Bronzebeard@lemmy.zip 3 weeks ago
Wrufieotnak@feddit.org 3 weeks ago
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 but the house for 1 million and sell it later for 2 million. Then the tax on 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.
jj4211@lemmy.world 3 weeks ago
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.
yeahiknow3@lemmings.world 3 weeks ago
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.
Wrufieotnak@feddit.org 3 weeks ago
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.
yeahiknow3@lemmings.world 2 weeks ago
You think it’s normal to lock the US population into place, decrease house market liquidity, reduce inventory, and drive up prices?
Here’s what I think is normal: the primary home, traditionally the ONLY 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 stock holdings should be taxed. Your huge boat should be taxed. Not your home.
CallMeAnAI@lemmy.world 3 weeks ago
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.
jj4211@lemmy.world 3 weeks ago
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.
CallMeAnAI@lemmy.world 3 weeks ago
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.
jj4211@lemmy.world 3 weeks ago
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.
yeahiknow3@lemmings.world 3 weeks ago
The “profit” is realized as soon as the sale goes through. Your financial illiteracy and the confidence with which you wield is astonishing to me.