A few different types no one wants to pay, even if it would lead them to a more enjoyable life.
Many homeowners in the Bay Area are in an interesting space. Many have lived in their homes for 20+ years and build up a lot of equity. So much that they now have to pay capital gains tax if they were to sell on any gains over $250k, if single or $500k, if married. It’s actually a problem most renters would like to have.
Many people say, well I won’t sell because of the taxes. Let me get this straight… You buy a home for say $600k years ago that is now worth $1.7 million and you don’t want to pay the tax on the gain. In this example, you’d take $1.7 million - $600k = $1,100,000. Subtract any closing cost and any capital improvements you’ve made to the home over the years. Let’s say new roof, kitchen, baths and backyard for $250k and let’s say $100k in cost for the sale of the home. That puts us at $1,100,000-$350,000 = $750,000. Now take away the $500k you put in your pocket and you’re left with $250,000 in gain that would be taxable. OK. No one likes taxes.
But, are you really going to keep it from moving closer to family, or traveling more, or downsizing to a home that suits your needs better with less maintenance. Many say yes. They would rather let the home deteriorate than make a change.
The other tax people talk about as it relates to real estate is property tax. It’s calculated by the sale price of your home times about 1.2%. It gets capped each year and can only go up a max of 2% per year. So many who bought homes years ago have a low property tax bill. There is a way for a seller currently to move their basis if at least one person on title is 55 or older. You can one time only, purchase a home of equal or lesser value and take your tax basis along. You must purchase in a county that cooperates. For more specifics, check on Proposition 60 & 90 for details.
So don’t let this keep you from moving closer to family, or releasing some of the equity in your home for travel or other expenses. Remember, you can’t take it with you!!! So go out there and live to the fullest!!!
Ask us how you can maximize your homes potential for sale!!